Benchmarks snap eight-day winning streak

Snapping their eight-day winning streak, Indian equity benchmarks ended sluggish day of trade with a cut of over half a percent as investors opted to book profits after markets hit fresh all-time highs in the previous session. Continued unrest in the Middle East and Ukraine mainly dampened the sentiments of market participants, while lower than expected Q1 FY15 earning from Wipro too upset investors. In dollar terms, IT services revenue was $1,740 million, a sequential increase of 1.2%. Moreover, the company’s operating margin of IT services declined to 22.8%, from 24.5% in the previous quarter, impacted due to wage hikes.

Sentiments also remained down-beat after Reserve Bank of India official stated that India continues to face threats on the growth and external sector fronts. Also, there was report that indirect tax collections inched up by 4.5 percent in the April-June quarter of the current fiscal, much lower than 25 percent increase envisaged in the Budget for the full 2014-15 fiscal, due to decline in custom duty and excise duty collections.

Meanwhile, Finance Minister Arun Jaitley ended retrospectivity in higher capital gains tax on debt mutual funds, but only for redemptions made between 1 April to 10 July. Jaitley, however, defended the budget proposal to impose higher capital gains tax, saying the facility was used by corporates mainly for arbitrage.

Selling got intensified after European markets made a choppy start with CAC and DAX were trading lower in early deals as weak corporate earnings weighed on investor sentiment. Though, Asian markets ended mostly in the green, led by over 1% rise in Shanghai Composite on the back of upbeat PMI data.

Back home, disappointing Q1 earning from Indian bank, Allahabad Bank, Colgate Palmolive, Shriram Transport Finance Company too dampened the sentiments. Meanwhile, retail Stocks like Trent, Shoppers Stop and Future Retail edged lower after trade minister Nirmala Sitharaman asserted that government has not decided its stance on a policy in place to allow foreign direct investment in supermarkets. Moreover, shares of jewellery retailers too ended lower after government underscored that it does not have any current proposal to cut the record 10% import duty on gold.

The NSE’s 50-share broadly followed index Nifty declined by over forty points to end below the psychological 7,800 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over one hundred and forty points to finish below its psychological 26,150 mark. Broader markets too struggled to get any traction and ended the session with a cut of around one and a half percent. The market breadth remained in favor of decliners, as there were 978 shares on the gaining side against 1,936 shares on the losing side while 102 shares remain unchanged.

Finally, the BSE Sensex plunged by 145.10 points or 0.55%, to 26126.75, while the CNX Nifty declined by 40.15 points or 0.51%, to 7,790.45.

The BSE Sensex touched a high and a low of 26300.17 and 26007.31, respectively. The BSE Mid cap index was down by 1.31%, while Small cap index was down by 1.96%.

The top gainers on the Sensex were Sun Pharma up by 4.44%, Hindustan Unilever up by 2.44%, HDFC up by 2.40%, Hero MotoCorp up by 1.79% and Dr Reddys Lab up by 1.09%. On the flip side, the key losers were Tata Motors down by 5.70%, Wipro down by 4.66%, BHEL down by 4.06%, Hindalco Inds down by 3.24% and Tata Power down by 2.66%.

On the BSE sectoral front, Healthcare up by 1.81% and FMCG up by 0.45% were the only gainers, while Realty by 2.80%, Metal down by 2.51%, Power down by 1.95%, PSU down by 1.80% and Auto down by 1.75% were the top losers in the space.

Meanwhile, Indirect tax collections grew by 4.5 percent to Rs 1,13,570 crore during April-June quarter of the current fiscal as compared to Rs 1,08,639 crore during the same period of previous financial year. Indirect taxes include customs duty, central excise duty and service tax. The increase in indirect tax collection was mainly driven by strong growth in service tax collections which grew by 19 percent to Rs 38,362 crore in the reported quarter as against Rs 32,617 crore during Q1 FY14. Service tax collections showed significant growth as the government had introduced the concept of negative list of taxation to widen the service tax base. As per the concept, all services except those in the negative list are taxable.

However, custom duty and excise duty collections declined in the reported month, reflecting slump in manufacturing activity. Customs collections declined by 3.1 percent y-o-y to Rs 39,549 crore in April-June ’FY15, while, central excise tax collection declined by 0.2 percent y-o-y to Rs 35,159 crore during the same period. 

The Budget aims to mobilise Rs 6,23,000 crore in 2014-15, which requires a growth rate of 20 per cent over 2013-14. Meanwhile, the government managed to collect over 18 per cent of the Budget target for indirect taxes during the first three months (April-June) of the current fiscal. Tax collection is the major source of revenue for the government. The government estimates to garner Rs 13.64 lakh crore from both direct and indirect tax collections during the current fiscal. In the previous fiscal year, tax collections fell short of target by a whopping Rs 77,000 crore as the government collected Rs 11.58 lakh crore against the budget estimate of Rs 12.35 lakh crore. To boost the tax collection, the income-tax department has also drawn up a plan to widen the tax base by going after non-filers, using annual information returns, capturing new information sources such as under-reporting of immovable property and buyback of shares.

The CNX Nifty touched a high and low of 7,840.95 and 7,748.60 respectively.

The major gainers of the Nifty were Sun Pharmaceuticals Industries up 4.62%, Lupin up by 3.07%, Hindustan Unilever up by 2.97%, Asian Paints up by 2.89% and HDFC up by 2.49%. On the flip side, the key losers were Tata Motors down by 5.77%, Cairn India down by 4.43%, DLF down by 4.42%, Wipro down by 4.41% and Jindal Steel & Power down by 4.10%.

European markets were trading in red; UK’s FTSE 100 was down by 0.11%, Germany’s DAX was down by 0.49% and France’s CAC 40 was down by 0.69%.

The Asian markets concluded Friday’s trade mostly in green, with Tokyo up as inflation data was in line with expectations. A survey on Thursday from China showing factory activity expanded at its fastest in 18 months in July also continued to give cautious markets a lift. However, ongoing unrest in the Middle East and Ukraine continued to keep investors alert for any developments that could have a wider impact on risk sentiment and markets. The International Monetary Fund lowered its outlook for global growth this year as expansions weaken from China to the US and military conflicts raise the risk of a surge in oil prices. The IMF stated that China’s economy is seen expanding 7.4% this year, less than the 7.5% forecast in April. The growth in the world’s second-largest economy will slow to 7.1% next year, less than its forecast in April for 7.3%. The IMF report reflected a world rattled by geopolitical risks that have risen since April, including the potential for sharply higher oil prices because of recent Middle East unrest.

Japan’s National Core CPI fell to a seasonally adjusted 3.3%, from 3.4% in the preceding month while Tokyo’s core CPI, which excludes fresh food costs, remained unchanged at an annualized rate of 2.8%. Singaporean Industrial Production rose to an annual rate of 0.4%, from -1.9% in the preceding month whose figure was revised up from -2.5%.