Indian equity benchmarks prolonged the lull for third straight day and completed the session on a dull note, marginally below the neutral line as market participants at large remained reluctant to build on long positions amid lackluster trading on European and Asian bourses. The session largely remained characterized by choppiness as the aimless indices moved slowly and crept towards the previous closing levels after the early decline. Sentiments remained down-beat for most part of the session on the report that India's trade deficit widened to $13 billion in November, the highest since July 2015 and sharply wider than the $10.41 billion gap in October, as imports, including purchases of gold, outpaced exports of goods. Oil imports rose 5.9% to US$ 6.84 billion, while the non-oil imports gained 11.7% to US$ 26.18 billion in November 2016 over November 2015. Though, for the third consecutive month, exports recorded a positive growth of 2.29 per cent year-on-year to $20 billion, but imports grew at a faster pace of 10.4 percent to $33.02 billion. Meanwhile, Indian market looks more vulnerable than other emerging markets due to the ongoing demonetisation drive and its impact on corporate performances. According to industry body CII, India's economic growth will see a ‘significant fall' in the second half of the current fiscal on account of cash crunch following demonetisation.  However, losses remained capped with the report that more than 1,700 new foreign portfolio investors (FPIs) have registered with capital markets watchdog SEBI in the first seven months of the current fiscal, a sign of their willingness to be a part of India's growth story in the long term. FPIs consider India as a preferred and stable market, given its macro-economic stability, long-term growth prospects and ongoing economic and social reforms. Some support also came with NITI Aayog CEO Amitabh Kant stated that cash shortages following the demonetisation of high value currency notes will end by mid-January. Finally, the BSE Sensex declined by 29.51 points or 0.11% to 26489.56, while the CNX Nifty dropped 14.15 points or 0.17% to 8,139.45.

The US markets closed lower on Friday, following reports that a Chinese warship seized an underwater US Navy drone in international waters off the coast of the Philippines. Meanwhile, the Federal Reserve (Fed) Bank of Atlanta raised its forecast for fourth quarter (Q4) gross domestic product (GDP) growth in the US on Friday. The Atlanta Fed increased its US Q4 GDP growth estimate to 2.6%, from the prior forecast of 2.4% published on December 14. The forecast of fourth-quarter real personal consumption expenditures growth increased from 2.1% to 2.4%. In other economy news, the pace of new home construction fell and builders applied for fewer permits in November, another sign of a housing market recovery that remains choppy. Housing starts tumbled 18.7% to a seasonally adjusted annual rate of 1.09 million. October's pace, a nine-year high, was revised up to 1.34 million. Still, the November data was 6.9% lower compared to a year ago. Builders applied for 1.2 million permits in November, 4.7% lower than in October, which was also revised up. The Dow Jones Industrial Average lost 8.83 points or 0.04 percent to 19,843.41, Nasdaq was down 19.70 points or 0.36 percent to 5,437.16, while S&P 500 dropped 3.96 points or 0.18 percent to 2,258.07.

Crude oil futures bounced back on Friday after two days of decline to notch gains for the week, as the dollar relented versus major rivals after surging to a 13-year high on disappointing housing data. Though, prices trended lower earlier in the day, amid news that Libya has restarted operations at two key oil fields, but traders emboldened the fact that some foreign oil producers are adhering to their promise to pull back on output. Benchmark crude oil futures for January delivery gained $1.00 or 2 percent to $51.90 on the New York Mercantile Exchange. In London, Brent crude for February delivery ended higher by $ 1.19 or 2.2 percent at $55.21 on the ICE.

Indian rupee appreciated against greenback on Friday due to increased selling of the American currency by exporters and banks. Sentiments got some support with data showing that India's exports rose for the third straight month in November, recording a growth of 2.29%, Imports increased by 10.44% to $33 billion. Some support also came with Chief economic Advisor (CEA) Arvind Subramanian's statement that India is better equipped than other emerging markets to weather the impact of higher US interest rates because of its stronger economic growth and record high foreign exchange reserves of more than $300 billion. However, a weak trend in the domestic equity markets capped the gains. On the global front, euro recovered some ground against the dollar on Friday after slides of up to 3 percent in reaction to the Federal Reserve outlook for U.S. interest rates next year. Finally, the rupee ended at 67.76, 7 paise stronger from its previous close of 67.83 on Thursday.

The FIIs as per Friday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 3978.44 crore against gross sell of Rs 4384.10 crore, while in the debt segment, the gross purchase was of Rs 666.18 crore with gross sales of Rs 1196.28 crore.

The US markets ended modestly in red in the last session, giving up the early gains, partly due to geopolitical concerns following reports that a Chinese Navy warship seized an underwater drone belonging to a U.S. oceanographic vessel in the South China Sea. The Asian markets have made mostly a lower start with the heightened geopolitical tensions. Japanese market was down, as the yen led gains among major currencies. The Indian markets after a volatile day of trade ended modestly in red in the last session. Today, the start of the new week is likely to remain somber and the markets will be extending the weakness amid soft global cues. Also, the industry body Assocham in its latest report has said that prospects of interest rate cut in near future may be bleak due to factors like continuous pressure on rupee against dollar, firming of the US interest rates and hardening of crude oil prices. Though, traders will be getting some encouragement with Finance Minister Arun Jaitley's statement that infrastructure investment needs a booster and his next Budget in February will focus on encouraging more public as well as private spending to boost economic growth. The Finance Minister said there is a long-term potential of more resources getting into the system and that is going to be the top priority. Meanwhile, NITI Aayog CEO, Amitabh Kant has said that the country needs innovative policies to enable disruption and enhance per capita income. He added that need to ease rules and regulations, and even scrap some in bulk. States are growing rapidly; they also need to adopt ease of rules and there should be healthy competition among States. There will be some buzz in the PSU oil marketing companies as the international Crude oil prices rose edged closer to new 17-month highs in last session, while the local companies hiked the petrol prices by Rs 2.21 per litre and diesel by Rs 1.79 a litre in line with global trends.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

  Nifty Top volumes

• Sun Pharmaceutical Industries has successfully concluded the acquisition of 100% stake of Ocular Technologies, Sarl on December 15, 2016.
• Maruti Suzuki is all set to launch a premium hatchback Ignis on January 13 as its third product at Nexa, its premium showrooms that now sell S Cross and Baleno.
• Bharat Heavy Electricals has bagged a major order for the supply of 118 sets of IGBT-based Traction Converters for 3 Phase 6,000 HP Electric Locomotives.
• Bajaj Auto has launched its latest sports bike 'Dominar 400' in India.
• Bharti Airtel is reportedly planning to launch two new ‘Infinity' plans for its postpaid customers starting at Rs 549.