Indian markets showed smart recovery despite snapping the first trading day of 2017 in the red territory.  Renewed buying in auto, cement and realty stocks, after banks announced reduction in lending rates, helped the indices to recoup most of the losses in the second half of the trading session. The country's largest bank State Bank of India (SBI) announced a steep interest rate cut in several years, by reducing its marginal cost of funds based lending rate (MCLR) by 90 basis points (bps) across all maturities, while Union Bank of India and Punjab National Bank also announced cuts ranging from 60 to 90 basis points.  Lending rate cuts by the several banks and Narendra Modi's announcement of new sops to boost low-cost housing ahead of the Union Budget affected the sentiment despite India's December manufacturing PMI dropping for the first time in a year. The Nikkei India Manufacturing Purchasing Managers' Index, or PMI, dropped to 49.6 in December from November's 52.3, showing the first business activity contraction in 12 months. The survey cited shortages of money in the economy leading to fall in output and new orders, which interrupted a continuous sequence of growth that had been seen throughout 2016. Meanwhile, Prime Minister has announced interest subsidy of up to 4% on loans taken in the New Year under the Pradhan Mantri Awaas Yojana (PMAY). According to the scheme, loans of up to Rs 900,000 taken out in 2017 to receive interest rebate of 4%, while loans of up to Rs 1,200,000 taken out in 2017 to receive interest rebate of 3% and loans of up to Rs 200,000 taken in 2017 for new housing, or extension of housing in rural areas, to receive an interest rebate of 3%. On the Sectorl front, oil marketing companies such as HPCL, BPCL and IOC gained after they increased petrol prices by Rs 1.29 a litre - the third increase in a month, and diesel price by 97 paise a litre - the second hike in a fortnight. Shares of sugar companies edge higher for the second straight session and rallied by up to 20% on hopes of debt restructuring. According to the reports, the Union finance ministry is considering a proposal to restructure sugar mills' debt, which is under severe stress due to lack of capacity utilisation. Finally, the BSE Sensex declined 31.01 points or 0.12% to 26595.45, while the CNX Nifty was down by 6.30 points or 0.08% to 8,179.50.

The US markets remained closed on Monday on account of 'New Year's Day holiday'.

Crude oil futures have made a positive start on Tuesday in Asian deals, supported by a private survey on China manufacturing.The Caixin manufacturing PMI for December came in at 51.9, well above the expected 50.7 and a jump from 50.9 in November. Benchmark crude oil futures for February delivery rose by $0.60 to $54.04 on the New York Mercantile Exchange. In London, Brent crude for March delivery was trading higher by 0.76 percent at $57.17 on the ICE.

Indian rupee depreciated against the US dollar on Monday, due to fresh demand for the American currency from banks and importers. The domestic currency remained weak since morning lacking any direction from the global markets as most of them remained closed on account of New Year. Sentiments remained dampened after India's manufacturing PMI (purchase manager's index) fell in December 2016 as demonetization took its toll on the economy. The headline seasonally adjusted Nikkei India Manufacturing PMI recorded below the crucial 50 threshold for the first time in 2016 during December. Some concern also came after Associated Chambers of Commerce and Industry of India (ASSOCHAM) in its latest report highlighted that banning of high value notes would lower growth rate due to economic slowdown in the third and fourth quarters of fiscal 2016-17. On the global front, dollar recovered from a two-week low against a basket of six major currencies on Monday, though trade was thin due to many markets being closed for the New Year holiday. Finally, the rupee ended at 68.23, 31 paise weaker from its previous close of 67.92 on Friday.

The FIIs as per Monday's data were net sellers in equity segment, while they were net buyers in debt segment. In equity segment, the gross buying was of Rs 2231.13 crore against gross selling of Rs 2910.00 crore, while in the debt segment, the gross purchase was of Rs 1000.43 crore with gross sales of Rs 524.52 crore.

The US markets remained closed in last session unable to give any cue to the other global markets. The Asian markets have made a mixed start after a long weekend and some of the indices are marginally in red, while the Chinese market was trading higher as the country's factories and services both closed out 2016 on relatively robust notes. The Indian markets made a tepid start of the New Year and ended modestly lower in the last session, despite gaining momentum in second half of the trade. Today, the start is likely to be in green tailing the gains in some Asian peers; however traders will be concerned with report that global private equity players pulled out a record $10.3 billion of their investments in 2016 from domestic markets. Meanwhile, India's core sector growth slowed to 4.9 percent in November from 6.6 percent in the previous month as crude oil and natural gas production declined. Though, it dodged the demonetization effect on the back of better show in coal, steel and electricity generation. Traders will also be eyeing the GST Council meet today, to arrive at a consensus on contentious issues, including dual administrative control and inter-state supply. There will be buzz in the hotel and restaurant stocks, as the government has said that 'service charge' on food bills is not compulsory and that the consumer has the option of not paying it if he is not satisfied with the service. Sugar stocks too will be in action on report from domestic rating agency ICRA that Sugar prices are expected to remain firm in the near term due to tight stock position following 9 per cent decline in production and steady growth in consumption.

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

  Nifty Top volumes

• Maruti Suzuki has reported 1% decline in total sales at 1,17,908 units in December 2016 as against 1,19,149 units in the year-ago period.
• Coal India had allocated 3.1 million tonnes of coal under spot e-auction in November 2016, down 29.5 % from the year-ago period.
• Bajaj Auto has registered a fall of 22% in total sales to 2,25,529 units in December 2016 against 2,89,003 units in December 2015.
• Larsen & Toubro has bagged another smart city project as part of the Government's Smart City Mission by being identified as the Implementation Partner to convert Pune into a Smart City. 
• Tata Motors' passenger and commercial vehicle total sales (including exports) in December 2016 stood at 40,944 vehicles, 2% growth over 39,973 vehicles sold in December 2015.