Markets continue to depict weakness; Nifty yet holds above 8000 mark

After hitting record highs for third consecutive session and slipping into negative territory in early deals, local equity markets continued to depict weakness on incremental profit-booking activities by funds and retail investors in absence of positive triggers. Though some recovery emerged immediately after markets slipped into low, but soon bears took over. Sentiments were rather minced after India's fiscal deficit reached nearly 83% of its full-year target in the first half of the year and core sector growth slowed down to 1.9% in September. On the macro-front, India's fiscal deficit was at Rs 4.39 trillion during April-September. The deficit was 76% during the comparable period in the previous fiscal year. While, market-participants largely ignored good manufacturing activity data. On the macro-front, business condition in Indian manufacturing sector continued to grow at a modest pace in October as stronger demand led manufacturers to raise prices of their products. Off day’s low, Sensex and Nifty were trading below the crucial 27,850 and 8,350 levels respectively, with losses of around 0.15%. However, broader indices outperforming larger counterparts with fat margins, were trading with gains of over 3/ 4 of a percent.
 
On the global front, Asian pacific shares were trading mixed on Monday with investors’ focus turning to mixed readings on Chinese manufacturing activity. The final reading on HSBC’s manufacturing purchasing manager index came in at 50.4 in October, unchanged from a preliminary reading but higher than 50.2 in September.

Closer home, most of the sectoral indices on BSE were trading lower, nevertheless stocks from Consumer Durables, Auto and FMCG counters were the top losers of the session. On the flip side, stocks from Realty, Metal and Capital Goods counters were the prominent gainers of the session. Meanwhile, technology stocks gained, tracking strong cues from the U.S. markets. Additionally, shares in Indian airline companies surged after State-run oil marketing companies slashed jet fuel prices since fuel charges contribute to nearly one-third of an airline's operational expenses. On the flip side, shares in Indian auto companies fell after manufacturers reported weak despatches in October. While, Maruti Suzuki plunged over a percent after reporting a 1.1 percent fall in October sales, Mahindra & Mahindra los over 2% on reporting 15 percent fall in sales. The overall market breadth on BSE is in the favour of advances which thumped declines in the ratio of 1264:711; while 21 shares remained unchanged.

The BSE Sensex is currently trading at 27821.59, down by 44.24 points or 0.16% after trading in a range of 27789.40 and 27969.82. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.84%, while Small cap index up by 1.00%.

The gaining sectoral indices on the BSE were Realty up by 2.02%, Metal up by 0.51%, Capital Goods up by 0.49%, Bankex up by 0.37% and INFRA up by 0.19% while, Consumer Durables down by 1.22%, Auto down by 1.09%, FMCG down by 0.21% and IT down by 0.21% were the losing indices on BSE.

The top gainers on the Sensex were Sesa Sterlite up by 2.19%, Axis Bank up by 1.41%, SBI up by 1.09%, Hindalco up by 0.80% and Dr. Reddys Lab up by 0.66%. On the flip side, GAIL India down by 4.24%, Mahindra & Mahindra down by 3.10%, Bajaj Auto down by 1.57%, Hero MotoCorp down by 1.30% and Maruti Suzuki down by 1.26% were the top losers.

Meanwhile, Industry body Assocham has sought deferment in the introduction of General anti-avoidance rules (GAAR) under the Indian income tax law, underscoring that at this juncture to introduce GAAR as part of tax law is not warranted in the country. Apex industry Chamber stated that Indian economy is not matured enough to stand up to the exacting standards of GAAR examination. On the other hand, tax administration is also not ready to handle a sophisticated instrument like GAAR.

Assocham highlighted that if GAAR is introduced at this stage, it will only act as a grip for more harassment of taxpayers, thus making the tax administration more adversarial.

GAAR is anti-tax avoidance rule which prevents tax evaders, from routing investments through tax havens like Mauritius, Luxemburg, Switzerland. There are roughly 45 tax havens in the world today. In Indian context, Mauritius is considered to be the most significant tax havens or tax evading route. The tax evasion in India through, Mauritius is estimated to be over $55 billion , mostly attributed to the loopholes in a bilateral agreement on double taxation.

According to GAAR guidelines, foreign investors not opting for treaty benefits and ready to pay taxes will not come under GAAR, but those who do opt for dual taxation avoidance agreements will come under its purview. The rule empowers the revenue department to annul any deal that has been made with the deliberate attempt to avoid tax. This rule applies to those claiming tax benefits over Rs 3 crore.

On Direct taxes code (DTC) issue, Assocham suggested the government not to introduce DTC as this would entail more cost than benefit. Assocham is of the view that a certain level of stability has been achieved with the present law. It added that introduction of a new law with new concepts will only unsettle the situation and more time will be spent on understanding it and putting a mechanism to administer it.

The CNX Nifty is currently trading at 8307.85, down by 14.35 points or 0.17% after trading in a range of 8297.70 and 8350.60. There were 19 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Jindal Steel & Power up by 3.83%, Zee Entertainment up by 2.51%, Sesa Sterlite up by 2.17%, DLF up by 2.08% and Tech Mahindra up by 1.99%. On the flip side, GAIL India down by 4.29%, Mahindra & Mahindra down by 3.37%, HCL Tech. down by 1.80%, NMDC down by 1.78% and BHEL down by 1.58% were the top losers.

Asian markets were trading mixed; with Shanghai Composite up by 7.66 points or 0.32% to 2,427.84; Straits Times gained by 11.24 points or 0.34% to 3,285.49; Taiwan Weighted rose by 30.1 points or 0.34% to 9,004.86 and Nikkei 225 advanced by 755.56 points or 4.83% to 16,413.76.

On the flip side, Hang Seng down by 94 points or 0.39% to 23,904.06 ; Jakarta Composite down by 13.68 points or 0.27% to 5,075.87; KOSPI Index down by 11.46 points or 0.58% to 1,952.97 and FTSE Bursa Malaysia KLCI down by 3.3 points or 0.18% to 1,851.

European markets were trading higher; with UK’s FTSE 100 gaining by 82.92 points or 1.28% to 6,546.47; France’s CAC advancing by 91.85 points or 2.22% to 4,233.09 and Germany’s DAX rising by 212.03 points or 2.33% to 9,326.87.