Markets to extend the weakness with a soft-to-cautious start

The Indian markets made a disappointing start of the New Year and in a last hour sell-off ended with over half a percent loss. Today, the start is likely to be a bit somber and the markets may consolidate after previous day’s big losses. However, there will be some support with the eight core industries growing by 6.8 per cent in November 2017, compared to the production during November 2016. The growth in November was driven by a 16.6 per cent increase in steel production over November 2016. Cement production too increased by 17.3 per cent in November 2017 over same month in 2016. Markets will also be getting some support with government's decision to ease norms for rectification of GST returns. The Finance Ministry has permitted businesses to rectify mistakes in their monthly returns - GSTR-3B - and adjust tax liability, a move that will help them file correct returns without fear of penalty. Meanwhile, there will be buzz in the markets with the Union Law Ministry turning down the proposal of Securities and Exchange Board of India (Sebi), who has sought additional powers for itself to impose fines besides issuing suspension and termination orders to stock brokers as well as annulling the central government’s power to frame rules on holding inquiries and imposing penalties against bourse violators. There will be buzz in the banking sector stocks, as the country's largest PSU bank SBI has lowered the base rate by 30 basis points to 8.65 per cent, setting trend for other banks to follow. It is also set to initiate insolvency proceedings against at least a dozen defaulting companies.

The US markets along with other global markets remained closed in last session, unable to give any cues. The Asian markets after a long weekend have made mostly a positive start led by the Chinese markets, as manufacturing PMI for December beating the expectation came in at 50.7 up from 50.8 in the previous month.

Back home, first day of 2018 turned out to be a dismal day of trade for Indian equity benchmarks with frontline gauges settling with a cut of around a percent, breaching their crucial 10,450 (Nifty) and 33,900 (Sensex) levels. Key bourses made cautious start and traded lacklustre throughout the session, as traders remained concerned with fiscal deficit at the end of November breaching the target and touching 112 percent of the budget estimate for 2017-18, mainly due to lower GST collections and higher expenditure. Fiscal deficit was Rs 6.12 lakh crore during April-November 2017-18. Traders also remained concerned with government's statement that Indian economy slowed down in 2016-17, with the gross domestic product declining drastically from 8 percent in 2015-16 to 7.1 percent the next year. Sentiments also remained dampened with Finance Minister Arun Jaitley's statement that the slower economic growth reflected lower growth in the industry and the services sectors, due to a number of factors including structural, external, fiscal and monetary factors. But selling in last leg of trade mainly played spoil sports for domestic bourses and dragged them to their intraday lows in dying hour of trade with traders turning pessimistic on report that overseas investors pulled out close to Rs 5,900 crore from domestic equities in Decemebr, with widening fiscal deficit and higher crude prices making market participants cautious on macro-economic front. In spite of December performance, foreign portfolio investors (FPIs) ended the year with a net inflow of over Rs 51,000 crore. Sentiments also weighed down on report that India’s external debt position surged by around 2.1 percent to $495.7 billion during July-September quarter (Q2 FY18), as compared to $485.8 billion reported for the end-June period. Traders shrugged off report that the government has extended by 10 days the last date for filing of final sales return GSTR-1 till January 10 under the Goods and Services Tax. Businesses with turnover of up to Rs 1.5 crore will have to file GSTR-1 for July-September by January 10, 2018, as against December 31, 2017 earlier.  Finally, the BSE Sensex declined 244.08 points or 0.72% to 33,812.75, while the CNX Nifty was down by 95.15 points or 0.90% to 10,435.55.