The Indian markets had managed a modestly positive close before going for a long weekend. Today, the start of the new week and new F&O series is likely to be cautious tailing mixed regional cues. All eyes will be on US President Donald Trump's first address to the US Congress on Tuesday. The president is expected to lay out his plans for tax and health-care reform and infrastructure spending.
There will be some support with Finance Minister Arun Jaitley's statement that the demonetization process is almost complete, hailing it as the “smoothest possible replacement” of high denomination currency anywhere in the world. Meanwhile, Prime Minister Narendra Modi has said that digital payment can check black money and play a key role in fighting graft. There will be some buzz in the power sector, as the power ministry has finally framed new rules to get electricity supply from independent power producers (IPP) in lieu of dry fuel. The new arrangement will replace the rigid practice of allocation of coal to state-owned generation plant.
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The US markets posted modest gains in last session supported by some positive economic reports on housing and consumer confidence. The Asian markets have made a mixed start despite the positive cues from Wall Street, with some indices trading in red, led by the Japanese market which is down by over a percent, as a stronger yen hurt exporters' stocks.
Back home, Indian equity indices continued their northward journey for sixth consecutive day and ended the last trading session of the week with marginal gains. Sentiments got some support with International Monetary Fund (IMF) assessment report that the adoption of the GST could help raise India's medium-term GDP growth to over eight per cent and create a single national market for enhancing the efficiency of the movement of goods and services.
Noting that India's tax revenue-to-GDP ratio (at around 17 and a half per cent) remains considerably below than its emerging market peers, the IMF said the implementation of a robust GST should be a key priority given its growth-enhancing effects. Adding optimism among inventors, RBI Governor Urjit Patel said faster demonetization and return of discretionary consumer demand will push economic activity in the latter part the fiscal. Patel, during the two-day Monetary Policy Committee meeting on February 7-8, also said that shifting monetary policy stance from accommodation to neutral will provide sufficient flexibility to move the policy rate in either direction.
However, upside remained capped with the SBI’s report that the growth estimate in the country’s economic output or gross domestic product (GDP) may be scaled down to less than 6% for the FY’17 as the impact of demonetization hurt consumption and output. CSO is going to release Q3 F17 GDP estimate on February 28, 2017. The Q3 estimates will be very critical as they cover the two-month period of demonetization and might give the glimpses of what happened in the economy during those two months.
Furthermore, investors remained cautious with report that India’s corporate debt repayment rate is abysmally low- around, only 25.7 cents to a dollar loaned (or Rs 17 on Rs 67 lent) ever returns to the lender after years of protracted recovery proceedings. Indian banks are staring at a bad-debt accumulation of Rs 6.68 lakh crore. Moreover, the existing legal and reparation infrastructure - such as debt recovery tribunals (DRTs) and SARFAESI Act - is inadequate for handling the volume of recovery cases. Finally, the BSE Sensex surged 28.26 points or 0.10% to 28892.97, while the CNX Nifty was up by 12.60 points or 0.14% to 8,939.50. Indian markets remained closed on Friday on account of Mahashivratri.
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