Post Session: Quick Review

Indian markets after a spectacular last session lost most of their gains on Friday, mainly on global growth concern, which not only impacted the local markets but spooked the equity indices across the globe. Although there was a cover-up attempt in the second half but still the markets succumbed to selling pressure and ended lower by about one and quarter percent for the day, ignoring the better than expected Infosys numbers. The IT bellwether has not only surpassed market expectations on almost all operating and financial fronts but gave a surprise to the street in the form of a 1:1 bonus announcement. However, the company has maintained its guidance at 7-9% in dollar revenue growth, which is much lower than Nasscom’s growth rate of around 13-15%.

Earlier the start was weak for the markets after the US Indices tumbled overnight amid concern Europe’s slowdown will hobble the world economy and major averages ending the session at their worst closing levels in about two months. The Asian markets too suffered sharp cuts and all the major indices lost over a percent for the day after the dollar appreciated against most of its major peers, as some Federal Reserve officials said the US economy may be at risk from a global slowdown.

Back home, correction mood returned after the big rally of last session and markets went for a free fall, once again losing their crucial psychological levels as the global growth concern overshadowed some positive economic reports. Traders also remained concerned about the Industrial Production data for August slated to be announced after the market hours. India's Index of industrial production (IIP) growth moderated to 0.5% in July 2014 and is expected to pick up month-on-month. There was across the board selling and only IT and tech sector escaped the wrath on encouraging set of second quarter earnings from Infosys that helped offset some of the losses of the market. The IT sector’s jubilation got doubled with the finance ministry saying that companies will be able to transfer or redeploy up to 50% of manpower from existing units to new ones in special economic zones (SEZs) without losing any tax benefits. There was some recovery attempt in the early second half but that got sold off as investors booked profits at higher levels. The biggest loser was the metal index amid growth concerns in China, the world's largest consumer of metals. And apart from auto and banking, defensive FMCG too witnessed deep cuts.

The BSE Sensex last traded at 26297.38, down by 339.90 points or 1.28% after trading in a range of 26261.61 and 26555.92. There were 7 stocks advancing against 23 stocks declining on the index. (Provisional)

The broader indices remained in red; the BSE Mid cap index was down by 1.38%, while Small cap index lost 1.12%.(Provisional)

The gaining sectoral indices on the BSE were IT up by 2.29%, TECK up by 1.17% while, Metal down by 4.11%, Auto down by 2.78%, FMCG down by 2.56%, Bankex down by 1.80%, INFRA down by 1.65% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Infosys up by 6.68%, BHEL up by 0.91%, Hero MotoCorp up by 0.83%, Reliance Industries up by 0.59% and Sun Pharma Inds. up by 0.54%. On the flip side, Tata Motors down by 5.31%, Hindalco down by 4.79%, Sesa Sterlite down by 4.60%, Tata Steel down by 4.03% and Mahindra & Mahindra down by 3.59% were the top losers. (Provisional)

Meanwhile, in a big sigh of relief to Information technology and IT-enabled services (ITeS) sectors firms, the government has permitted these firms to transfer or redeploy up to 50% of manpower from existing units to new ones in special economic zones (SEZs) without losing any tax benefits.

The Central Board of Direct Taxes (CBDT) has notified that mere transfer or redeployment of technical manpower from an existing unit of a taxpayer to a new SEZ unit in the first year of commencement of business will not be construed as splitting up or reconstruction of an existing business, provided the number of technical staff so transferred does not exceed 50% of the total manpower actually engaged in developing software at any point of time. Earlier, the limit of technical staff transferred was set at much lower at 20%.

The government decision came after intense pressure by the industry body Nasscom seeking clarity over the availability tax benefits to the IT companies that have set up parallel operations in SEZs to take advantage of profit-linked exemptions available under the policy.

Section 10AA of the Income Tax Act, 1961 provides tax benefit to a unit set up in a SEZ if the revenue is generated from exports of computer software or from providing ITeS. However, this tax exemption is not available till now if the unit is formed by transfer of used plant or machinery or splitting or reconstruction of an existing business.

The CNX Nifty last traded at 7859.95, down by 100.60 points or 1.26% after trading in a range of 7848.45 and 7924.05. There were 10 stocks advancing against 40 stocks declining on the index. (Provisional)

The top gainers on Nifty were Infosys up by 6.63%, HCL Tech up by 2.48%, Asian Paints up by 1.24%, BHEL up by 1.16% and Sun Pharma Inds up by 0.81%. On the flip side, Jindal Steel & Power down by 5.91%, Tata Motors down by 5.36%, NMDC down by 5.35%, Hindalco down by 4.88% and Sesa Sterlite down by 4.62% were the top losers. (Provisional)

European Markets traded in the negative zone, Germany’s DAX declined by 189.58 points or 2.11% to 8,815.44, UK’s FTSE 100 was lower by 88.9 points or 1.38% to 6,342.95 and France’s CAC decreased by 64.9 points or 1.57% to 4,076.55. (Provisional)

Asian markets ended in red on Friday, after a warning by the European Central Bank about that region’s economic outlook sparked a rout in US shares. Taiwan market remained shut for the trade today for National Day. The Bank of Japan agreed that exports remained weak and a few of them were cautious about a sustainable rise in exports, the minutes of the bank’s September 3-4 policy meeting released showed. Despite sluggish exports and factory output, the nine-member board still believed that the positive domestic cycle from income to spending was in place in both the household and corporate sectors, and that Japan’s economy was likely to continue its moderate recovery trend, overcoming the drag from the April sales tax hike. Data released before the September meeting showed that industrial production rose only 0.2% on month as the sales tax hike continued to dampen domestic demand and overseas demand remained generally sluggish. The BoJ board decided by a unanimous vote to leave the bank’s policy target unchanged.

Japanese Household Confidence rose to a seasonally adjusted annual rate of 39.9. Malaysian Industrial Production rose to a seasonally adjusted annual rate of 6.5%, from 0.5% in the preceding month. Philippines Industrial Production fell to a seasonally adjusted annual rate of 5.1%, from 7.7% in the preceding month.