Benchmarks trim losses; trade continues in red

Indian equity benchmarks trimmed losses but continued their weak trade hovering just below neutral line in the late afternoon session. The markets were under pressure after release of June WPI data, which though eased at four month low of 5.43%, showed a sharp revision in April inflation figures at 5.55% from 5.20%. The disappointment continued after Standard & Poor’s stated that the budget would not have an impact on India’s sovereign ratings until the agency could see how the measures will be implemented, especially regarding meeting the fiscal deficit target. Traders were seen piling up positions in Power, India Infrastructure Index and Capital Goods while selling was witnessed in Consumer Durables, IT and TECK sector stocks. Hectic activity was witnessed in pharmaceuticals stocks after India’s pharmaceutical pricing regulator cut and capped the prices of more than 100 drugs used to treat diseases ranging from diabetes to HIV to malaria, a move likely to hit the profit margins of drug firms. In scrip specific development, Advani Hotels and Resorts (India) was locked at upper circuit limit on reports that ITC Hotels could be close to buying its property in Goa.

On the global front, the Asian markets were trading mostly in green, while the European markets traded on optimistic note. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 7,500 and 25,100 levels respectively. The market breadth on BSE was negative in the ratio of 1016:1638 while 100 scrips remained unchanged.

The BSE Sensex is currently trading at 25012.63, down by 11.72 points or 0.05% after trading in a range of 25095.76 and 24892.00. There were 16 stocks advancing against 14 stocks declining on the index. The broader indices were trading on a mixed note; the BSE Mid cap index was up by 0.07%, while Small cap index was down by 0.44%.

The gaining sectoral indices on the BSE were Power up by 1.25%, India Infrastructure Index up by 1.04%, Capital Goods up by 0.62%, Bankex up 0.62% and PSU up by 0.61% while, Consumer Durables down by 1.84%, IT down by 1.09%, TECK down by 0.91%, HealthCare down by 0.50% and FMCG down by 0.40% were the losing indices on BSE.

The top gainers on the Sensex were Hindalco Industries up by 4.60%, Tata Power up by 2.55%, Tata Steel up by 2.45%, Axis Bank up by 2.02% and TCS up by 1.33%. On the flip side, Infosys down by 2.95%, SSLT down by 2.42%, Wipro down by 2.14%, Hindustan Unilever down by 1.86% and Bharti Airtel down by 1.79% were the top losers.

Meanwhile, in order to attract major investments in the country’s special economic zones (SEZs), the government may announce sops in Foreign Trade Policy (FTP), expected in the next few weeks.  The FTP governs all exports and imports related activities in India and primarily aims at enhancing the country's exports. The five-year FTP (2009-14) ended on March 31 and the new government will introduce new FTP for the period 2014-19.

Commerce Ministry stated that though the government has not announced any sops for SEZs in budget 2014-15, the ministry will try to convince government to restore tax benefits for the zones in the Foreign Trade Policy. Commerce Ministry has planned to make a fresh pitch for excluding the developers from paying the Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) in new FTP. MAT, which was imposed in budget 2011-12 on SEZs despite making no change in the SEZ Act, has remained the major factor responsible for dwindling investors’ confidence. Under this section, every company (SEZs) is liable to pay a MAT at the rate of 18.5 percent, plus applicable surcharge and cess on book profits. 

Commerce Ministry argued that with the prevailing unfavorable tax regime like MAT, DDT in the country, no investor would like to set up a unit in the SEZ which in turn will impair capital formation in the domestic economy. SEZs contribute about 30 per cent to India’s exports, employ an estimated 13 lakh workers across the country and have attracted investments worth Rs 3 lakh crore. As on December 2013, India has sanctioned 175 SEZs, largest in the world.

The CNX Nifty is currently trading at 7459.50, down by 0.10 points after trading in a range of 7471.65 and 7422.15. There were 26 stocks advancing against 24 stocks declining on the index.

The top gainers on Nifty were Hindalco Industries up by 4.50%, Asian Paints up by 3.91%, PNB up by 2.59%, Power Grid up by 2.49% and Tata Power up by 2.45%. On the flip side, Infosys down by 3.01%, HCL Tech down by 2.42%, Wipro down by 2.32%, SSLT down by 2.00% and HUL down by 1.93% were the top losers.

Asian markets were trading mostly in green; with KOSPI Index adding 0.26%; Shanghai Composite adding 0.96%; Taiwan Weighted advancing by 0.26%; Hang Seng gaining 0.49%; Nikkei 225 soaring by 0.88%.

On the flip side, Straits Times was trading lower by 0.08%, FTSE Bursa Malaysia KLCI lost 0.04% and Jakarta Composite inching lower 0.15%.

The European markets were trading in green; Germany’s DAX added 0.85%, France’s CAC 40 gained 0.74% while, UK’s FTSE 100 was up by 0.83%.