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NSE Intra-day chart (26 December 2016)
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Market Commentary 27 December 2016
Markets to recover from last session fall on supportive regional cues


Indian equity bourses commenced the fresh week on a depressing note as the benchmark indices extended previous week's sell-off and sank by close to a percentage points to a seven-month low, on worries that capital gains taxes would rise after Prime Minister Narendra Modi said market participants should contribute to nation-building. Though, Finance Minister Arun Jaitley later clarified that the government did not plan to impose long-term capital gains tax, it was not enough to prevent selling pressure. Finance Minister also expressed hope that demonetisation will help increase government revenue and lower fiscal deficit, leading to higher expenditure on defence and rural infrastructure. Market participants also remained cautious with the report that the GST Council could not evolve a consensus on the issue of dividing the administrative powers between the Centre and States in its two-day meeting which concluded on Friday even as it cleared all other provisions of draft model GST Bill and whole of compensation Bill. The next meeting of the GST Council will take place on January 3 and 4, 2017.  Foreign institutional investors' pulling out also continues to weigh on equity markets. So far in December, FIIs have pulled out Rs 3,744 crore from equity markets following US Federal Reserve decision to increase interest rates by 0.25% and hinting at quicker rate hikes in 2017. The markets are likely to remain volatile this week as traders may roll over positions in the Futures & Options (F&O) segment from the near month i.e. December 2016 series to next month i.e. January 2017 series. The near month December 2016 derivatives contracts will expire on Thursday i.e. December 29, 2016. On the global front, Asian markets ended mostly higher on Monday. Back home, finally, the BSE Sensex declined by 233.60 points or 0.90% to 25807.10, while the CNX Nifty dropped 77.50 points or 0.97% to 7,908.25.


The US markets remained closed on Monday on account of 'Christmas holiday'.


International Crude oil futures trade remained closed on Monday.


Indian rupee ended strong against dollar on Monday on account of sustained selling of American currency by banks and importers. Traders got some support after Finance Minister expressed hope that demonetisation will help increase government revenue and lower fiscal deficit, leading to higher expenditure on defence and rural infrastructure. Besides, dollar weakness against other currencies overseas also supported the rupee sentiment but capital outflows from the domestic equity markets restricted the gains. On the global front, dollar dipped against the yen on Monday, after U.S. Treasury yields fell on mixed economic data. Finally, the rupee ended at 67.74, 7 paise stronger from its previous close of 67.81 on Friday.


The FIIs as per Monday's data were net sellers in equity and debt segments both. In equity segment, the gross buying was of Rs 2089.30 crore against gross sell of Rs 3549.95 crore, while in the debt segment, the gross purchase was of Rs 422.79 crore with gross sales of Rs 917.02 crore.


The US markets remained closed in last session, unable to give any cue to the other global markets. The Asian markets have made mostly a positive start and the Japanese market has moved slightly higher as the yen halted a four-day advance. Indices in the region also moved higher with crude climbing for a seventh straight session before OPEC and other producing nations start reducing output. The Indian markets suffered sharp correction in last session, as worried investors on capital gains tax buzz resorted to profit taking, despite clarification by the finance minister Arun Jaitley that the government has no plans to hike long-term capital gains tax on stocks. Today, the start is likely to be in green on positive regional cues and the markets will witness some rebound after the selloff of last session. Traders will be getting some support with FM Arun Jaitley's hint of a lower tax regime; he said that India has been guided by the principle that a lower level of taxation is the key to building a globally competitive economy in the past two and a half decades since liberalization. Meanwhile, markets will also be eyeing the meeting of Prime Minister Narendra Modi with economists and senior government officials at NITI Aayog. The theme of the meeting is 'Economic Policy Reform, Road Ahead' and it will be the first such meeting after the central government's announcement of demonetisation on November 8. However, there will be some cautiousness too, with global rating agency Care Ratings report that the overall employment in the country grew by just 1.6 per cent in FY16, though it marked a recovery compared to FY 2015. There will be some buzz in the banking and financial stocks, as the Reserve Bank of India has given an additional 60 days to farmers hit by demonetisation to repay their crop loans due in November-December and said that prompt repayment would be eligible for the extra 3 per cent interest subsidy.


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