During the calendar year 2016, benchmark indices ended more or less on the flattish note. Since, we know year 2016 stood a ‘year full of surprises’ for the Indian as well as global markets. All the surprises like Brexit, unexpected result from the US Presidential election, US Fed Reserve rate hike and Modi government surgical strike on black money all have surprised the markets every now and then, which dragged the market to end on the flattish note. However, before demonetization, benchmark indices performed well on the back of recovery in Indian economy, payoff of seventh pay commissions, better than expected monsoon which drive the rural India demand along with improvement in corporate earnings. Since the surgical strike on currency has come in the picture, benchmark indices have shed all its earned 2016 gains fearing short term disruption in the Indian economy along with continuous selling pressure coming from the FIIs. During the calendar year 2016, FIIs have sold around Rs -9995 cr in the equity market while DII bought hefty amount Rs 35000 cr in the same market. Further FIIs have been selling their holding massively post the demonetization, which has been dragging the market down.

Going ahead, we still see the demonetization impact to keep hovering on the market gains. As the disruption caused in Indian economy sentiments are likely to take two to three quarters to turn back. We are building high expectation from upcoming union budget 2017-18. Ongoing demonetization impacts have been so grave that our economy needed aid boosters to recover out of it. We expect union budget to carry some changes in the existing tax structure. As we know, the 2016 budget was expected to raise the tax exemption bar from the current level of Rs. 2.5 lakhs to 3 lakhs per annum. Since, the change could not be carried out in the existing budget; it is expected to be announced in 2017. Further, with the grievances and pain inflicted upon the common man with the note ban move, the expectation of a raise in tax exemption rate is ripe. Adding to it, five state assembly elections are approaching so we expect government to remain more focus on infrastructure spending along with rural development schemes, bringing more cheers in the market. To revive the sentiments in the economy, govt. could put its best effort to pass Goods and Services Tax on time and bring some easy and beneficial measures to push the cashless transactions. However, on the pain side, we can count US Fed tentative estimates of increasing interest rates in 2017, may bring some pressure in the market. Additionally, better than expected economic recovery in china along with strengthening in the US economy could facilitate the money outflow from the emerging markets like India, hence putting pressure on the benchmark indices. We are also not very bullish for 2017 amid the disruption in economy in the short term. Overall looking at the picture, we believe the market to take time to beat its 2016 Nifty high and remain trading in the broader range of 7000 to 8500 for calendar year 2017. If we talk about the sectors to perform, we believe Infrastructure, IT and Pharma to remain performer in 2017. Hence, advise to have exposure in the mentioned sectors.

Bullion View:

Bullion remained traded on the volatile note throughout the year amid many global events like Brexit and US Fed rate hike. Despite of looming uncertainties globally, it just provided single digit growth. In the first six month of calendar year 2016, gold were being sold like hot cake. Furthermore, it surged to capture upper circuit on the day of Brexit as investors and traders went in search of safe havens immediately after election results were announced, hit its 2016 high during July, $1,364. However, prices didn’t sustain there at high level and again fell at the lower level. Off-late recovery in the US market led the dollar index to showcase strength against basket or currencies. Further after receiving the two or three rate hike signal by the US Fed in 2017, has also added weight in the dollar index. As we know the dollar and gold are inversely proportional to each other. Hence, we believe further recovery in the US market is going to dampen the mood of gold. With that in mind, we see gold moving towards the lower area of its bearish trend channel. Still, we would like to await the inauguration of the US‘s next president. Additionally, China is the largest consumer of gold, has been showing slow growth recovery. Hence, we foresee gold not to go beyond 30,000 in the upcoming year 2017 and remain traded in the range of 25000 to 30000 in the same period.