Benchmarks enlarge losses; Nifty slips below 7100 mark

Indian equity benchmarks added losses and continued their weak trade in the late afternoon session on account of selling in frontline counters. The market got a boost on encouraging monthly WPI data, which eased in-line with expectation at two month low of 5.20% in month of April, 2014, as compared to 5.70% for the March and 4.77% during the corresponding month of the previous year, however selling crept in dragging the benchmarks in red. Traders were seen piling up positions in Power, Consumer Durables and Oil & Gas stocks, while selling was witnessed in IT, TECK and Capital Goods sector stocks. In scrip specific development, Aurobindo Pharma was trading in green on reports that MSCI Global Standard Indices will add the company in its list with effect from May 30. Bank of India was trading in red on reporting fourth quarter (January-March) results where net profit fell by 26.3% year-on-year to Rs 557.5 crore on lower other income and higher operating expenses. United Spirits was trading weak after foreign brokerage firm downgraded the stock to neutral from outperform, citing a lack of immediate triggers.

On the global front, the Asian markets were trading mostly in green, while the European markets traded on pessimistic note. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 7,100 and 23,800 levels respectively. The market breadth on BSE was negative in the ratio of 1053:1676 while 141 scrips remained unchanged.

The BSE Sensex is currently trading at 23797.91, down by 17.21 points or 0.07% after trading in a range of 23,971.78 and 23742.75. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices witnessed additional selling pressure; with both BSE Mid cap and Smallcap index trading lower by 0.47% and 0.57% respectively.

The gaining sectoral indices on the BSE were Power up by 1.19%, Consumer Durables up by 0.86%, Oil & Gas up by 0.30%, PSU up by 0.20% and FMCG up by 0.10%.

On the flip side, IT down by 1.04%, TECK down by 0.97%, Capital Goods down by 0.72%, Auto down by 0.41% and HealthCare down by 0.29% were the losing indices on BSE.   

The top gainers on the Sensex were Tata Power up by 4.19%, Tata Steel up by 2.71%, NTPC up by 2.31%, Gail India up by 1.97% and Axis Bank up by 1.80%.

On the flip side, Bajaj Auto down by 2.77%, Dr. Reddy’s Lab down by 1.67%, Wipro down by 1.49%, ICICI Bank down by 1.43% and TCS down by 1.36% were the top losers on the index.

Meanwhile, with an aim to enhance the investment in domestic equity benchmarks, the Securities and Exchange Board of India (SEBI) will soon propose for rationalization of tax structure of financial products to make them more attractive to retail investors.

The market regulator has stated that rationalization of tax structure will channelise household savings into financial products. In India, only about 8% of the country's households have invested in equities, directly or indirectly through mutual funds which is very low as compare to major economies like the US at 42% and China with 14% in equity markets.  The market regulator wants to increase the tax exemptions limits for mutual fund retirement plans. Besides, the SEBI also wants to increase investment limit in various mutual fund schemes such as equity-linked savings scheme and RGESS.

The SEBI has notified that tax incentive scheme similar to the US 401(k) plan can be introduced in the country. The scheme can enhance long term investments and bring greater depth in capital markets through mobilising household savings to the capital markets. High investment brought by domestic investors would help in curbing the unwanted volatility in domestic equity markets and would reduce the excessive reliance on the foreign investors.

The rational tax structure is viewed as an important factor which could draw investors towards equity markets. However, to increase the investment in markets, the government had already introduced various scheme such as Rajiv Gandhi Equity Savings Scheme in the 2012-13 Budget, offering 50% tax rebate to new retail investors who invest up to 50,000 directly in equities. However, the scheme remained ineffective to encourage retail investors due to its complex structure including a lock-in period.

The CNX Nifty is currently trading at 7,097.40, down by 11.34 points or 0.16% after trading in a range of 7,152.55 and 7,082.55. There were 23 stocks advancing against 27 declining on the index.

The top gainers of the Nifty were Tata Powers up by 4.42%, Tata Steel up by 2.70%, NTPC up by 2.39%, PNB up by 2.33% and PowerGrid up by 2.28%.

On the flip side, Asian Paint down by 4.78%, Bank of Baroda down by 3.56%, Bajaj Auto down by 2.88%, NMDC down by 2.67% and McDowell down by 2.48% were the major losers on the index.

Asian equity indices were trading mostly in green; Hang Seng up by 0.66%, Taiwan Weighted up by 0.06% and Straits Times up by 0.33%. While, Shanghai Composite down by 1.12% and Nikkei 225 down by 0.75% were the only losers amongst Asian pack.

Jakarta Stock Exchange was closed today on account of Vesak Day holiday.

The European markets were trading in red; France’s CAC 40 was down by 0.19%, Germany’s DAX dropped 0.14% and UK’s FTSE 100 lost 0.13%.