Q3 Numbers, Decision On GST Roll Out Will Direct The Markets
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Indian markets ended 2016 on a positive note, as the benchmark indices turned positive in the last week of trading and just managed to deliver positive returns. Ever since the demonetisation decision by the government, the markets have only been moving southwards trying to ascertain the real impact of currency demonetisation on various sectors in the economy, especially the cash-dependent ones. However, as we moved towards the end of the 50-day demonetisation period, markets were in a much better mood anticipating sops and announcements from the government and the central bank of the country.
Both the benchmark indices Sensex and Nifty gave positive returns supported by cheaper valuations which prompted investors to look after good quality heavily battered stocks for investment. Mid-caps remained flat, whereas small-cap stocks did well in the last two weeks. As for sectoral performance, the FMCG and realty indices stood out as they delivered returns of 4.3 and 3.8 per cent, respectively. On the other hand, banks lost as they had to cut down on lending rates.
Globally, markets remained a mixed bag going into the year-end holiday, with most of the markets trading on thin volumes and no clear movement on either side. European markets outperformed their developed market peers as they gainedanywhere in the range of 1 to 2.3 percentage points. The US markets took a breather and remained flat with a negative bias. China posted robust factories and services numbers for the month of December, thereby boosting sentiments.
In commodities, crude touched 18-month high at USD 58 on the back of Saudi Arabia expecting to raise price amidst production cuts.
On December 31, 2016, PM Modi addressed the nation at the end of the 50-day demonetisation period, praising the people for their support to the government on demonetisation. The PM in a bonanza of sorts doled out several sops for the urban poor and women as also for the rural economy, ranging from lower interest rates, credit facility, affordable housing push, women welfare, etc
Going ahead, markets would keenly watch the outcome of the GST Council meet as possibility of meeting the deadline of April 1, 2017 looks a distant possibility now. However, reaching a consensus on the contentious issues will be the key for the successful roll-out of the GST as early as possible. In the coming days, budget preparations would enter last phase with hectic consultations taking place with the states and the industry bodies. Lastly, from next week onwards, Q3 earnings would start flowing in and markets would track them closely to assess the impact of demonetisation on individual companies.
