Stay Tuned—Do­mes­tic Macros To Bring Mar­kets Back On Track

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Bulls are striv­ing hard to be back in the reck­on­ing by slug­ging it out with the bears in the In­dian stock mar­kets. The im­ple­men­ta­tion of GST from July 1 along with the ap­proval in J&K had trig­gered vig­or­ous volatil­ity in the mar­kets, with even the GST pro­tag­o­nists un­sure about the im­pact. The only surety for now is the in­crease in di­rect and in­di­rect tax col­lec­tion for the Cen­tral and state gov­ern­ments. How­ever, strong do­mes­tic macroe­co­nomic numbers are all set to off­set the GST am­bi­gu­ity and the geopo­lit­i­cal risks ris­ing across the globe.

Macroe­co­nomic numbers fol­low­ing the GST came in quite favourable for the bulls, re­sult­ing in con­tin­u­a­tion of con­sol­i­da­tion in the mar­kets. The gov­ern­ment re­ported 3.6% in­crease in Eight Core In­dus­tries (ECI) for May 2017, com­pared to the pre­vi­ous pe­riod. More­over, In­dia's fis­cal deficit has reached Rs 37.3 lakh crore to 68.3% of the FY18 tar­get. The ex­ter­nal debt too shrank 2.1% to USD 471.9 bil­lion for March-end. The ser­vices PMI has ex­panded at its fastest pace in 8 months in June 2017 to 53.1, driven by hike in de­mand and new or­ders. Go­ing for­ward, in­fla­tion is ex­pected to con­tinue to be lower with lower farm prices and un­cer­tainty of GST. How­ever, IIP may be seen ris­ing for May 2017. Auto sales numbers for June are ex­pected to re­main a mixed bag as auto com­pa­nies have slashed their prices to at­tract more sales post-GST.

On the geopo­lit­i­cal front, ten­sions are brew­ing in the Asian sub-con­ti­nent. North Korea launched its un­co­or­di­nated ICBM mis­sile test that landed in the sea of Ja­pan, the area utilised for com­mer­cial and fish­ing ac­tiv­i­ties. The US and Ja­pan may tol­er­ate the North Korean au­dac­ity, but it may pro­voke China to take ac­tion against the coun­try. Indo-China bor­der is­sues have height­ened ten­sions be­tween the two neigh­bour­ing coun­tries, damp­en­ing cross-bor­der trade and tourism. Nev­er­the­less, Prime Min­is­ter Modi’s visit to Is­rael as­sured bet­ter de­fence tech­nol­ogy deals to counter se­cu­rity risks from China and Pak­istan.

Com­ing back to the do­mes­tic mar­kets, the FIIs have turned net sell­ers, while the DIIs have been net buy­ers in the In­dian mar­kets last week. The Q1FY18 cor­po­rate earn­ings are at the doorstep, which will di­rect the mar­kets in the ses­sions to come. The progress of mon­soon and the pos­i­tive im­pact of GST on spe­cific sec­tors such as lo­gis­tics can be looked at by traders and in­vestors. Oth­er­wise, buy­ing on dips is the best strat­egy for in­vestors. The mon­soon and GST out­comes would be mostly seen dur­ing Septem­ber 2017. Few sec­tors like FMCG look pos­i­tive even now as com­pa­nies have main­tained their rates for old stocks, ir­re­spec­tive of higher tax in­ci­dence post-GST. Also, agro-based in­dus­tries, de­fence and ma­jorly in­fra sec­tors re­main a good bet in an oth­er­wise in­de­ci­sive mar­ket. The Ran­somware at­tack may lead to some de­lays in In­doEuro­pean IT project im­ple­men­ta­tions. We re­main pos­i­tive on the mar­kets where we see Nifty head­ing to­wards 10700-11200 even now, post a strong move to­wards 9930-9950.

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