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The Bombay Stock Exchange in Mumbai on Feb 29, 2016 (representational image).IANS

Benchmark stock market indices ended in the red on the first day of trading for the calendar year 2017, though select stocks like Tata Steel, Tata Motors, Maruti Suzuki and Mahindra ended with gains. The PMI Manufacturing Survey reading for December dropped to 49.6 from 50.3 in the previous month, the first month of contraction in the calendar year 2016.

Read: Domestic car sales in December reveal mixed trends 

"Four of the five sub-components of the PMI edged below 50.0, while average delivery times lengthened further. At the sector level, operating conditions deteriorated in both the consumer and intermediate goods categories," according to IHS Markit and Nikkei.

"Having held its ground in November following the unexpected withdrawal of 500 and 1,000 banknotes from circulation, India's manufacturing industry slid into contraction at the end of 2016. Shortages of money in the economy steered output and new orders in the wrong direction, thereby interrupting a continuous sequence of growth that had been seen throughout 2016. Cash flow issues among firms also led to reductions in purchasing activity and employment," Pollyanna De Lima, an economist at IHS Markit and author of the report, said.

Aside from the world of business, India witnessed a landmark development when the country's top court sacked the president and secretary of cricket governing body, the BCCI.

There were no significant triggers for investors, except December 2016 volume sales data of automobile companies, some of which was declared on Sunday. Maruti Suzuki India Ltd. (MSIL), Hyundai Motor India and Mahindra reported fall while Renualt and Toyota Kirloskar Motor (TKM) posted growth in the first full month of demonetisation.

Tata Steel (up 3.8 percent at Rs 406), Mahindra (up 3.42 percent at Rs 1,224), Tata Motors (up 3.37 percent at Rs 487) and MSIL (up 2.69 percent at Rs 5,466) supported the Sensex, though the 30-scrip index closed 31 points lower at 26,595. The NSE Nifty ended 6 points lower at 8,179.

"The new year got off to a rocky start with markets trying to gauge the impact of PM's credit sops and banks' rate cuts. Lenders including NBFCs recovered though and the weak PMI figures could not reign in the pull back, presumably having already priced in soft macros pertaining to the note ban period. There was little signs from global markets as well, with several countries still shut for new year festivities, but the week ahead is expected to be flush with more macro releases and should ensure volatility," Anand James, chief market strategist, Geojit BNP Paribas Financial Services, said in a note.

Two-wheeler makers reported mixed results, with Royal Enfield maker Eicher Motors posting growth while Bajaj Auto saw sales fall sharply. 

Home loans are poised to get cheaper after the country's biggest lender, State Bank of India, reduced interest rates with effect from January 1, 2017.