Feeble global cues drag benchmarks lower

Indian barometer gauges witnessed bloodbath on Wednesday as investors opted to book profit after two consecutive sessions of jubilation amid feeble global cues. Frontline indices ended the session with a cut of around a percentage point and declined below their crucial 7,700 (Nifty) and 25,700 (Sensex) levels. Selling was both brutal and wide-based as none of sectoral indices on BSE, barring software and technology, were spared. Counters, which featured in the list of worst performers, include metal, banking and realty.

Sentiments remained down-beat as Indian rupee depreciated against the dollar. The rupee fell to a four-and-half month low on Wednesday as broad gains in the dollar versus other majors and Asian units hurt. Moreover, markets also overlooked some developments happening on new indirect tax regime, Goods and Services Tax, which the government announced was likely to be introduced shortly. Minister of State for Finance Nirmala Sitharaman also highlighted that centre in consultation with states had decided to phase out CST to facilitate introduction of GST and to give compensation to the states for revenue loss on this account.

Selling got intensified as European markets made an awful start with CAC, DAX and FTSE were trading with a cut of over a percent in early deals as Italy falls back into recession, Kremlin unveils tit-for-tat sanctions and Poland warns of Russian military build-up. Asian markets too ended in the red on concerns that the conflict in Ukraine could escalate.

Back home, slump in banking counter too played spoil sport for the Indian equity markets after IDBI’s Q1 disappointed street. The bank has reported a sharp 66% year-on-year (yoy) drop in net profit at Rs 105 crore for the first quarter (April-June) of current fiscal, due to lower net interest income (NII) and other income. The public sector lender had a profit of Rs 307 crore in the same quarter last year. On the flip side, software and technology stocks edged higher as rupee depreciated against dollar. Additionally, sugar stocks too sweetened after 95-odd private sugar mills in Uttar Pradesh decided to crush no sugarcane in the 2014-15 season, scheduled to start from October until the state government gives in to two of their demands, with the first being linking mandated price to the market price of sugar and the other being, stopping its ongoing coercive action against mills for not clearing past arrears to farmers for cane.

The NSE’s 50-share broadly followed index Nifty tumbled by over seventy points to end below the psychological 7,700 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over two hundred and forty points to finish below its psychological 25,700 mark. Broader markets too witnessed selling pressure and ended the session with a cut of around half a percent. The market breadth remained in favor of advances, as there were 1,490 shares on the gaining side against 1,479 shares on the losing side while 122 shares remain unchanged.

Finally, the BSE Sensex plunged by 242.74 points or 0.94%, to 25665.27, while the CNX Nifty declined by 74.50 points or 0.96%, to 7,672.05.

The BSE Sensex touched a high and a low of 25901.68 and 25621.85, respectively. The BSE Mid cap index was down by 0.77%, while Small cap index lost 0.15%.

The top gainers on the Sensex were Infosys up by 2.01%, BHEL up by 0.66%, Mahindra & Mahindra up by 0.55%, Hero MotoCorp up by 0.48% and RIL up by 0.42%. On the flip side, the key losers were ITC down by 2.63%, ICICI Bank down by 2.60%, Axis Bank down by 2.42%, SSLT down by 2.26% and Tata Steel down by 2.06%.

On the BSE sectoral front, IT up by 0.67% and Teck up by 0.10% were the only gainers, while Metal down by 1.90%, Bankex down by 1.82%, Realty down by 1.25, FMCG down by 1.24% and PSU down by 1.16% were the top losers in the space.

Meanwhile, the government has stated that the proposed new indirect tax regime, Goods and Services Tax (GST) is likely to be introduced shortly. The central government in consultation with states had decided to phase out Central Sales Tax (CST) in order to facilitate introduction of GST and to give compensation to the states for revenue loss on this account.

GST, the proposed new indirect tax regime and one of the biggest taxation reforms in India will replace existing state and federal levies such as excise duty, service tax and value-added tax (VAT) and will integrate State economies and boost overall growth. Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions. The industry is awaiting its introduction, as GST would remove the cascading effect, boost revenues and aid economic growth.

In a leg up to the early implementation of the goods and services tax (GST) reform, the government is presently engaged to address states’ concerns over its design and compensation for revenue loss to ensure early implementation of this singular tax reform. States are insisting that petroleum be kept out of the purview of the GST are also opposed to subsuming of entry tax within GST, especially that entry tax which is in lieu of octroi. States are also upset with the centre for non-payment of Central Sales Tax (CST) compensation from the year 2011-12.

The previous UPA Government had brought a Constitutional Amendment Bill to introduce the GST, but failed to get it through, owing to the lack of consensus. Since the basic framework is ready, new Government does not require much effort to re-introduce the Bill. Further, it would not have a problem passing the Bill, given its strength in the Lok Sabha.

The CNX Nifty touched a high and low of 7,740.95 and 7,658.95 respectively.

The major gainers of the Nifty were Infosys up by 1.34%, Power Grid Corporation of India up by 1.28%, Asian Paints up by 1.04%, Mahindra & Mahindra up by 0.80% and Reliance Industries up by 0.63%. On the flip side, the key losers were ITC down by 2.99%, PNB down by 2.71%, ICICI Bank down by 2.67%, SSLT down by 2.44% and Axis Bank down by 2.35%.

European markets were trading in red; UK’s FTSE 100 was down by 1.14%, Germany’s DAX was down by 1.55% and France’s CAC 40 was down by 1.32%.

Asian equity indices ended mostly in red on Wednesday, with the regional index extending yesterday’s losses, amid escalating tensions in Ukraine. Indonesia’s economic expansion continued to slow in the second quarter, dragged by falling growth in investment. Gross domestic product rose 5.12% in the April-June period from the same period last year, the Central Statistics Agency (BPS) reported. The BPS revised first-quarter growth to 5.22%. Investment growth slowed to 4.5% in the first quarter, year on year, compared to 5.1% in the first quarter. Hong Kong’s home sales, which hit a two-year high in July, lack the catalyst to rebound further as government policies to contain prices deter speculators. Monthly sales volume may be capped at around 7,000 to 8,000 in the third quarter as existing homeowners are reluctant to sell and investors are discouraged by additional taxes. Japan’s index of leading economic indicators rose to a seasonally adjusted 105.5, from 104.8 in the preceding month whose figure was revised down from 105.7. Malaysian Trade Balance fell to 3.97B, from 5.70B in the preceding month.