Markets to make a somber start on negative global cues

The Indian markets consolidated a bit in the last session and the major benchmarks ended modestly in red after a choppy day of trade. Today, the start is likely to remain weak on negative global cues and on lingering concerns over the possibility of some slippage in the fiscal deficit path. Traders however, will be getting some support with a private report stating that business optimism index for the January-March quarter 2018 touched three and half year high on improving demand conditions and expectation that government sops in the budget will revive consumption. It further said that the upcoming Union Budget and assembly elections during 2018 might have generated optimism about government sops that could push revival in consumption. Also, there will be some support with report that agricultural exports from India grew 18 per cent to $21 billion in the April-October 2017-18 period compared to just 5 per cent in 2016-17. There will be some buzz in the FMCG sector stocks, especially the biscuit manufacturers who have demanded a lower GST rate on biscuit and related products than the current 18 per cent, saying it is a mass consumption food product and similar products are subject to lower tax rate. There will be some important earnings announcements too, to keep the markets buzzing.

The US markets deposing their early gains ended lower in the last session, some profit taking contributed to the pullback by stocks, although the decline was relatively subdued compared to the recent strength. The Asian markets have made mostly a soft start, pulling back from record highs, following declines in US counterparts. Many traders are questioning the pace of gains in equity markets at the start of 2018 as the earnings season ramps up.

Back home, snapping three days gaining streak, Indian equity benchmarks ended the volatile day of trade with marginal losses on Tuesday, as traders opted to book profit at higher levels. Markets altered between green and red throughout the session to end marginally in red, as traders remained a bit cautious with the merchandise export growth slowing sequentially to 12.4% in December, while imports jumping 21.1% during the month, aided by a spike in crude oil prices and a favourable base. The trade deficit widened to its highest level in over three years in December to $14.9 billion, a three-year peak. However, excluding the almost 35% rise in oil purchases from overseas, overall imports rose 17.2% in December. Traders also remained on sidelines ahead of GST Council meeting scheduled to be held on January 18, which will also be the last meeting before Budget 2018. The council is likely to revise rates for electric vehicles, farm equipment, ease compliance & modify the reverse charge mechanism. The recommendations of the law review committee are also likely to be taken up for consideration by the GST Council, comprising Centre and states. However, losses remained capped, as International Monetary Fund (IMF) highlighted that India is reclaiming its place as a growth leader after a short period of slowdown in the economy. Some relief also came with Prime Minister Narendra Modi promising more economic reforms to further improve the ease of doing business in India as he invited Israeli companies to invest in India. PM further noted that India is the fastest growing economy with FDI inflows at all time high. Traders also took some solace with private report stating that two Asian economies - India and Indonesia - will see a pick-up in GDP growth in 2018, reaping benefits of the economic reforms. It further noted that in the Indian context, adapting to the new GST regime, economic reforms aiding growth and recapitalisation plan for public sector banks will lead to increased investment growth and economic activity over the coming quarters. Finally, the BSE Sensex declined 72.46 points or 0.21% to 34,771.05, while the CNX Nifty was down by 41.10 points or 0.38% to 10,700.45.