Markets to make a mildly soft-to-cautious start on sluggish global cues

The Indian markets extended gains in the last session to end at record highs, on firm global cues and BJP’s win in both Gujarat and Himachal Pradesh. Today, the start is likely to be mildly soft-to-cautious on tepid global cues and traders will be eyeing the final Senate vote on U.S. tax-cut legislation. Traders will however be getting some support with Commerce & Industry Minister Suresh Prabhu’s statement that the government is working on a strategy to boost share of services in total exports from the country. There will be buzz in the PSU banking stocks with global rating agency Moody's latest report that capital raising by a number of public sector banks (PSBs), including PNB and UBI, is credit positive because it will help improve their loss-absorbing buffers. Moody's said that it signals improved access to the equity capital markets and will reduce PSBs' dependence on fund infusion from the government. Some action can be seen in the oil companies stocks, as the Finance minister Arun Jaitley has said that the Centre favours including petroleum products in the ambit of the Goods and Services Tax (GST) but it would want a consensus with the States before taking such a step.

The US markets ended marginally in red in the last session, giving up some of their previous session gains on profit taking, as traders cashed in on the strength seen in recent sessions. Though, House Republicans voted to approve the first major tax reform legislation in several decades, cutting tax rates for businesses and individuals. The Asian markets have made a mixed start and some indices in the region are down by around a quarter percent, with investors awaiting the final votes on U.S. tax-cut legislation.

Back home, extending northward journey for fourth straight session, Indian equity benchmarks ended the Tuesday’s trade at all time closing high levels, with frontline gauges recapturing their crucial 33,800 (Sensex) and 10,450 (Nifty) levels. Markets started the session on optimistic note with traders continued getting strength with the assembly election results announced yesterday. Blue chips soared during the trade after victory of Bharatiya Janata Party (BJP) in his home state of Gujarat and Himachal Pradesh, raising hopes of continued reforms. Traders also took encouragement with the private report highlighting brighter growth prospects for India by FY20 and beyond. India’s growth prospect is likely to see a slowdown in the next two years followed by recovery in the medium term, with 2019-20 GDP expected at around 7.6 per cent. Meanwhile, the government has sought Parliament’s approval to spend a net additional Rs 33,380 crore ($5.21 billion) in new spending in the fiscal year to March 2018. The additional spending will be on top of an approved spending of Rs 21.4 lakh crore in the annual budget. Markets extended its rally in last leg of trade to end near intraday highs after Finance Ministry in its year end review report stated that overall fundamentals of the economy remained strong in the current financial year, on the back of firm macroeconomic indicators, improvement in World Bank's ease of doing business ranking and sovereign rating upgrade by Moody’s. Market participants shrugged off report that the government seeking Parliament’s approval to spend a net additional Rs 333.8 billion ($ 5.21 billion) in new spending in the fiscal year to March 2018. The additional spending will be on top of an approved spending of $ 334.9 billion in the annual Budget. Also, investors ignored India Ratings’ report where it has warned that the farm debt waivers announced by the five large states together will widen the combined fiscal deficit of the states by Rs 1,07,700 crore or 0.65 percent of GDP this financial year. Finally, the BSE Sensex soared 235.06 points or 0.70% to 33,836.74, while the CNX Nifty was up by 74.45 points or 0.72% to 10,463.20.