GST, rupee likely to chart markets' direction

Mumbai: The central government's efforts to build consensus on the countours of the Goods and Services Tax (GST), along with rupee fluctuations and volatility in global crude oil prices, are expected to set the course for the Indian equity markets in the upcoming week.

Besides, the direction of foreign funds and the impact of demonetisation on the growth of earnings will impact investors' sentiments.

"The markets would probably continue to be range bound as the holiday season approaches for global investors," Devendra Nevgi, Chief Executive of Zyfin Advisors, told IANS.

"The rise in the US dollar and crude oil would be a concern for global risk appetite towards emerging markets, especially net commodity importers. The markets are also adjusting to the US Fed rate hike (including the future path) and implications of the same."

According to Nevgi, the stock market's movement will also depend upon the impact of demonetisation as gauged by the investors.

"Stock specific news flows would continue the short term movements of individual stocks," Nevgi predicted.

"With major events of the year over, Indian markets should see volumes and volatility easing for the rest of December. It should mean the markets would also aim at positioning itself towards the budget announcement."

Further, investors are expected to read just "their rate cut expectations" after the release of Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) meet's minutes.

On December 7, the RBI kept its key lending rates unchanged, citing global and local uncertainties and also lowered the country's growth forecast for 2016-17.

During that meet, all six members of the panel, chaired by the RBI Governor Urjit Patel, voted in favour of the monetary policy decisions -- the minutes of which will be released on December 21.

Another major theme for the week starting December 19 will be the government's efforts to build consensus over the GST framework.

"The GST meet scheduled for December 22 and 23 will be important as roll-out chances for April 2017 now looks bleak," Anand James, Chief Market Strategist, Geojit BNP Paribas Financial Services, told IANS.

On December 17, Finance Minister Arun Jaitley said the GST regime needs to be implemented between April 1 and September 16, 2017, due to constitutional compulsions.

He elaborated that the GST Council was working towards resolving the deadlock.

"The range of timing when GST has to come into force is between April 1 and September 16, 2017 due to constitutional necessity. Nobody has the luxury of time," Jaitley said in his address at the 89th annual general meeting of Federation of Indian Chambers of Commerce and Industry (Ficci) here.

The Constitution (One Hundred and First Amendment) Act, 2016 was notified on September 16 for GST come into force within one year.

Jaitley said the crucial issue of dual control or who will exercise control over GST assessees -- the Centre or the states - still needs to be resolved in the GST Council, but assured that each assessee will be assessed only once.

Dhruv Desai, Director and Chief Operating Officer of Tradebulls expected investors to closely follow global market sentiments and price movement of the Indian rupee against the US dollar.

"Indian equity markets are likely to be volatile due to profit booking and selling pressure at higher levels in coming sessions. Stock specific price movement can be seen in Indian equity markets next week," Desai explained.

Desai pointed out that the pace of FIIs' (Foreign Institutional Investors) fund inflow into equity segment will be a crucial determining factor for the movement of the key indices.

In terms of investments, provisional figures from the stock exchanges showed the week witnessed a massive outflow of foreign funds worth Rs 3,610.10 crore.

On the other hand, figures from the National Securities Depository (NSDL) disclosed that foreign portfolio investors (FPIs) were chiefly net sellers in the debt market. They sold equities and debt instruments worth Rs 2,341 crore, or $ 346.2 million from December 13-16.

On a technical-level, NSE Nifty is expected to correct further after last week's slide.

"Traders will need to watch if the Nifty can hold above the immediate supports of 8,127-8,105, else a further correction is likely early next week. A rally could emerge if the resistance of 8,226 is taken out," Deepak Jasani, Head - Retail Research, HDFC Securities, told IANS.

Last week, Indian equities markets ceded their initial gains to close on a negative note, as global cues, along with rupee's depreciation and the outflow of foreign funds, subdued investors' sentiments.

The barometer 30-scrip sensitive index (Sensex) of the BSE plunged by 257.62 points or 0.97 per cent to close the week's trade at 26,489.56 points.

Similarly, the wider 51-scrip Nifty of the National Stock Exchange (NSE) fell by 122.3 points or 1.48 per cent and closed at 8,139.45 points.