Benchmarks end slightly in the red ahead of IIP, CPI data

Indian equity benchmarks ended slightly in the red on Thursday with frontline gauges tumbling below their crucial 27,000 (Sensex) and 8,100 (Nifty) levels. Trade remained choppy with investors staying on sidelines ahead of the Index of Industrial Production (IIP) and Consumer Price Index (CPI) numbers which are due to be released tomorrow. The street widely expects Industrial production to grow 1.8% from a year earlier in July, slower than June’s 3.4% increase, while India’s consumer price inflation, closely tracked by the Reserve Bank of India, is expected to come down to 7.80% in August from July’s 7.96%. Sentiments also remained dampened on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 9.91 crore on September 10, 2014.

However, losses remained capped as some support came after the United Nations Conference on Trade and Development (UNCTAD) said in its latest report that the Indian economy will grow at a rate of 5.6 percent in 2014. Also, Rating agency Moody’s, in its report titled ‘India outlook: Prospects brighten’, underscored the downside risks to the economy have receded, while those of prospects brightened and pegged growth rate to accelerate to 5.2% in 2014 and further to 6.5% by end of 2015.

On the global front, European markets were trading mostly in the red in early deals as investors awaited a report on US jobless claims. Asian markets ended mostly in the red on concern over slower China’s economic growth and US interest rate speculation that US interest rates may increase earlier than expected. Higher US interest rates could attract FII investment to US from emerging global markets, including India.

Back home, selling in pharma stocks mainly played spoilsport for the Indian equity markets, led by over four percent fall in Sun Pharma on reports that the company’s manufacturing facility in Halol (Gujarat) is undergoing a surprise inspection by the US Food and Drug Administration (US FDA). Besides, shares of disinvestment candidates viz. Oil and Natural Gas Corporation (ONGC), Coal India and NHPC also succumbed to selling pressure after the Union Cabinet on Wednesday cleared a dilution of the government’s stake in these companies.

On the flip side, stocks related to auto sector remained on buyers’ radar, as the car sales continued their positive momentum and moved up for the fourth month in running, rising by 15% in August. Additionally, sugar stocks like, Shree Renuka Sugars, Triveni Engineering, EID-Parry (India), Rana Sugars all edged higher, as the Food Minister Ram Vilas Paswan has said that the Centre is trying to resolve a stalemate between the Uttar Pradesh government and the state's sugar producers.

The NSE’s 50-share broadly followed index Nifty declined by around 10 points to end below the psychological 8,100 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over sixty points to finish below the psychological 27,000 mark. Broader markets, however, outperformed benchmarks and ended the session with a gain of over a percentage point. The market breadth remained in favour of advances, as there were 2025 shares on the gaining side against 1041 shares on the losing side while 100 shares remain unchanged.

Finally, the BSE Sensex declined by 61.54 points or 0.23%, to 26995.87, while the CNX Nifty lost 8.40 points or 0.10% to 8,085.70.

The BSE Sensex touched a high and a low of 27150.78 and 26904.50, respectively. The BSE Mid cap index was up by 1.14%, while the Small cap index gained 1.46%.

The top gainers on the Sensex were SBI up by 1.90%, BHEL up by 1.53%, Hero MotoCorp up by 1.52%, Tata Power up by 1.11% and Hindustan Unilever up by 0.92%. On the flip side, Sun Pharma down by 4.29%, ONGC down by 3.58%, Coal India down by 3.53%, Wipro down by 1.42% and Dr. Reddys Lab down by 0.66% were the top losers in the index.

On the BSE Sectoral front Infrastructure up by 1.24%, Capital Goods up by 0.66%, Auto up by 0.66%, Power up by 0.57% and FMCG up by 0.52% were the top gainers, while Healthcare down by 1.73%, Metal down by 1.08%, Oil & Gas down by 0.48%, PSU down by 0.39% and Realty down by 0.34% were the top losers in the space.

Meanwhile, the government is likely to implement proposed new indirect tax regime Goods and Services taxes (GST) by mid-2015. With an aim to provide impetus to Indian industry by implementing GST, Finance Ministry has started a comprehensive study of tax exemptions granted to various goods and services under indirect tax regime in order to streamline the tax structure under GST.

The government may implement two types of GSTs including central GST and state GST. However, states are opposing the two tier structure and above constitutional amendment to transfer of taxation rights from state to centre under a uniform structure. States have also proposed to keep products such as petroleum, tobacco and alcohol out of GST ambit.

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. GST will help create a pan-Indian market for movement of goods and delivery of services and add about 1-2 percent to country's GDP. 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.

The CNX Nifty touched a high and low of 8,127.95 and 8,057.30 respectively.

The top gainers of the Nifty were IDFC up by 3.52%, State Bank of India up by 2.20%, Bank of Baroda up by 1.93%, BHEL up by 1.44% and PNB up by 1.36%. On the other hand, Sun Pharmaceuticals Industries down by 4.29%, ONGC down by 3.50%, Coal India down by 3.25%, NMDC down by 2.32% and Lupin down by 1.84% were the top losers.

Most of European markets were trading in red, France's CAC 40 was down by 0.06%, and United Kingdom's FTSE 100 was down by 0.17%, while Germany’s DAX was up by 0.17%.

Asian markets ended mostly in red on Thursday, with the benchmark index heading its sixth day of decline, as investors weighed Chinese inflation data. China’s consumer inflation cooled more than expected in August, further evidence that the economy is losing momentum, but economists are divided over whether Beijing will use the extra room to announce fresh stimulus measures. The consumer price index (CPI) rose 2.0 percent in August from a year earlier, missing market expectations for 2.2 percent and down from 2.3 percent in July. The producer price index fell 1.2 percent, its 30th consecutive monthly decline, as weak economic conditions continue to rob Chinese companies of pricing power. The market had expected a 1.1 percent decline after a drop of 0.9 percent in July. Malaysian Industrial Production fell to a seasonally adjusted annual rate of 0.5%, from 7.0% in the preceding month.

Confidence at big Japanese manufacturers turned positive in July-September and they expect business conditions to improve further in the following quarter, a government survey showed, suggesting a gradual economic recovery from the slump after April’s sales tax hike. The survey also showed that companies are growing more positive on business investment, boding well for the government’s goal of fostering a sustainable growth cycle led by pick up in business activity, higher wages and stronger consumer spending. The business survey index (BSI) of sentiment at large manufacturers stood at plus 12.7 in July-September, improving from minus 13.9 in the prior three months. Japan’s BSI large manufacturing conditions rose to a seasonally adjusted annual rate of 12.7, from -13.9 in the preceding quarter.