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NSE Intra-day chart (20 December 2016)
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Market Commentary 21 December 2016
Markets to make a green start on positive global cues


Indian benchmarks indices extended the sorrow of closing in the red territory for the fifth consecutive session on Tuesday as investors shied away from taking any big bets on rising geopolitical concerns in Turkey, Germany and Switzerland. Sentiments took a hit after Global financial services major Nomura revised upwards India's current account deficit (CAD) forecast to 1.4% of GDP for the current fiscal from 0.4% earlier. According to Nomura, India's trade deficit widened to a 16-month high of $13 billion in November from $10.4 billion in October, as a result of a sharp slowdown in exports after demonetization and a pickup in imports, led by gold and higher commodity prices. For the fourth quarter (October-December) of 2016 Nomura expects a current account deficit of 2.5% of GDP (versus 0.9% earlier) and for the January-March period, it is likely to be around 2% of GDP. Trading sentiments weakened further on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 535.77 crore on December 19, 2016. The downside reamined capped with Finance Minister Arun Jaitley's statement that Reserve Bank of India was fully prepared to deal with currency shortages post demonetisation and has enough currency in its chests to last 'far beyond' December 30, 2016. Some support also came with NITI Aayog member Ramesh Chand's statement that despite the impact of demonetisation, growth in agriculture for the current year will still be above 5 per cent, though he pointed that the prevailing cash crunch has hit the growers of perishables more compared to those who grow bulk crops such as paddy and cotton. Meanwhile, Aviation stocks came under pressure after the report that India's Airlines industry may have to bear an additional tax burden of up to Rs 15,000 crore annually once the Goods and Services Tax (GST) is implemented. The additional tax burden may push airlines, most of which have turned profitable, into losses again, coming as it does at a time when global fuel prices are flaring up. Finally, the BSE Sensex declined by 66.72 points or 0.25% to 26307, while the CNX Nifty dropped 21.95 points or 0.27% to 8,082.40.


The US markets closed higher on Tuesday, with the Dow and Nasdaq hitting their latest in a series of records, as the market's recent upward trend - led by a rally in bank stocks - continued unabated. The market's gains have been largely uninterrupted of late, with investors mostly shaking off Monday's attacks in Berlin and Ankara. The modest returns put the Dow within striking distance of the psychologically important milestone of 20,000, but meager trading and a dearth of market-moving events, such as economic data, provided little impetus for a breakout into the record books. Meanwhile, Federal Reserve (Fed) Bank of San Francisco president John Williams revealed that his decision to vote for a rate hike at the December meeting was unaffected by the election of Donald Trump for the US presidency and said that future fiscal policy have little impact on current Fed policy outlook. Williams added that it was appropriate to tighten monetary policy this month was due to the prior drop in unemployment, the uptick in core inflation and signs of good momentum such as job growth. The Dow Jones Industrial Average added 91.56 points or 0.46 percent to 19,974.62, Nasdaq was up 26.50 points or 0.49 percent to 5,483.94, while S&P 500 gained 8.23 points or 0.36 percent to 2,270.76.


Crude oil futures moved further high on Tuesday, though the oil prices seem locked in a range between $50 and $54 as the markets wind down for the Christmas break. Traders were eyeing the US oil inventories data for further clarity on whether major crude producers will stick to their promise to pull back on output. OPEC members agreed to reduce output by a combined 1.2 million barrels per day starting from January 1, some traders remain skeptical that the planned cuts will be as substantial as the market currently expects. Benchmark crude oil futures for January delivery was up by $0.39 or 0.74 percent to $53.45 on the New York Mercantile Exchange. In London, Brent crude for February delivery ended lower by $ 0.59 or 1.07 percent at $55.51 on the ICE.


Indian rupee breaching 68 mark ended considerably weaker against dollar on Tuesday, tracking the losses in the local equity markets. Sentiments remained dampened with the report that CLSA cut its Gross Domestic Product (GDP) growth forecast for FY17 by 1.2 percentage points to 6.5 percent and added that the current disruption is unlikely to affect the outlook for FY18. Further, the assassination of Russian ambassador to Turkey and the terrorist attack in Germany where a truck rammed into people in the Christmas market weighed on currencies across the globe. On the global front, yen dropped against dollar after the Bank of Japan closed a tumultuous year for monetary policy by keeping its yield-curve and asset-purchase programs unchanged while pledging to keep expanding the monetary base until inflation is above 2 percent. Finally, the rupee ended at 68.05, 29 paise weaker from its previous close of 67.76 on Monday.


The FIIs as per Tuesday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 3086.53 crore against gross sell of Rs 3640.59 crore, while in the debt segment, the gross purchase was of Rs 324.46 crore with gross sales of Rs 738.10 crore.


The US markets extended the gains, despite a lack of major catalysts amid another quiet day on the U.S. economic front. With the upward move on the day, the Dow and the Nasdaq reached new record closing highs. The Asian markets have made a green start tailing the gains in the US markets and as oil extended gains leading the energy stocks higher. The Indian markets extended the bearish trend in last session and deposed another quarter a percent, giving up all the early gains. Today, the start is likely to be slightly in green on positive global cues. Markets will be showing some recovery after five days of lull and traders will be getting some encouragement with Finance Minister Arun Jaitley statement that the government would offer tax incentives to small businesses engaged in cashless transactions, as part of the government's fight against the cash economy. He said the move would enable businesses with annual turnover of Rs 2 crore to save up to 30 per cent in tax payments. There will be some cheer for the banking stocks, as the Reserve Bank of India has urged the Finance Minister Arun Jaitley to allow banks to get full tax deduction on the provisions made towards bad debts. Such a facility of full tax deduction will shore up banks, which face challenges from demonetisation and sluggish loan recoveries in the ongoing third quarter. The railways stocks too will be buzzing, as the Finance Minister indicated that the Railways must shift its focus from populism to performance and called for a transparent accounting system for Railways and outsourcing some of its non-core functions such as hospitality services.


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