Benchmarks crash like house of card; Nifty breaches 8,800 mark

Wednesday’s trading session turned out to be a daunting one for stock markets in India and benchmarks ended below their crucial 8,800 (Nifty) and 28,800 (Sensex) levels as investors booked profit in technology stocks like TCS and Infosys on worries that strength in the rupee after inflation data may persist and hurt revenues. Moreover, investors remained sidelines ahead of corporate performance of big companies like TCS and Reliance Industries. After trading in tight band for most part of the day’s trade, domestic gauges crashed like house of card in the last leg of trade. Selling was both brutal and wide-based as none of sectoral indices, barring FMCG and oil and gas, on BSE were spared. Counters, which featured in the list of worst performers, include healthcare, infrastructure, auto and technology.

Investors failed to dray any sense of relief from better-than-expected macro economic data. India’s consumer price index (CPI) inflation slowed to 5.17% year-on-year in March, compared to 5.37% in February, while the annual rate of inflation, based on monthly wholesale price index (WPI) ebbed to- 2.33% in March as compared to -2.06% witnessed in February, which could encourage the central bank to deliver another off-cycle interest rate cut to boost economic recovery. Besides, markets also failed to draw heart from International Monetary Fund’s (IMF) statement that India will overtake China as the fastest growing emerging economy in 2015-16 by clocking a growth rate of 7.5 percent on the back of recent policy initiatives, pick-up in investments and lower oil prices. Also, a senior American trade official has reportedly said that a series of reforms unleashed by India in recent months are “important steps” around open, predictable and rules based reforms.

On the global front, Asian markets ended mostly in the red led by Chinese Shanghai Composite which edged lower by over a percent on reporting that first-quarter gross domestic product, which grew 7 percent, the slowest pace since the 2009 global recession. Also, the International Monetary Fund has said that it sees Chinese expansion slowing even further to 6.8 percent this year and 6.3 percent in 2016. However, European markets have made a positive start ahead of the European Central Bank's meet. The Bank is expected to keep rates unchanged.

Back home, software and technology related stocks declined after lower-than-expected US retail sales in March. Power stocks too edged lower despite government setting a target of generating close to 1,100 billion units of electricity during the current financial year as the coal supply at thermal power stations has eased. Markets remained closed on Tuesday on account of a local holiday. On the flip side, oil & gas sector’s stocks especially in Reliance Industries edged higher with the Union government telling the Supreme Court that the pricing of domestically produced gas comes under its “supervisory powers” and its dispute with Reliance Industries cannot be subjected to arbitration proceedings.

The NSE’s 50-share broadly followed index Nifty declined by over eighty points to end below the psychological 8,800 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over two hundred and forty points to end below its crucial 28,800 mark. Broader markets too struggled to get any traction and ended the session with a cut of around half a percent. The market breadth remained in favor of decliners, as there were 1,387 shares on the gaining side against 1,472 shares on the losing side while 98 shares remain unchanged.

Finally, the BSE Sensex plunged by 244.75 points or 0.84% to 28799.69, while the CNX Nifty dropped by 83.80 points or 0.95% to 8,750.20.

The BSE Sensex touched a high and a low of 29094.61 and 28721.63, respectively. The BSE Mid cap index was down by 0.86%, while Small cap index was down by 0.81%.

The top gainers on the Sensex were Sesa Sterlite up by 3.32%, ONGC up by 1.76%, SBI up by 1.59%, ITC up by 1.23% and Tata Power up by 1.19%. On the flip side, BHEL down by 3.43%, Mahindra & Mahindra down by 3.26%, Tata Motors down by 2.81%, Wipro down by 2.70% and Axis Bank down by 2.65% were the top losers.

The gaining sectoral indices on the BSE were FMCG up by 0.19% and Oil & Gas up by 0.17% while, Healthcare down by 1.55%, Infrastructure down by 1.54%, Auto down by 1.49%, TECK down by 1.47%, IT down by 1.46% and Realty down by 1.37% were the losing indices on BSE.

Meanwhile, foreign institutional investors (FIIs) have lost a case against levy of tax on capital gains they made. They had gone to a tribunal, which is called Authority for Advance Rulings against levy of 20 percent Minimum Alternate Tax (MAT) on capital gains but got a judgment against themselves as the tribunal decided against them.

Finance Minister Arun Jaitley said the government will press ahead with Rs 40,000 crore tax demand on FIIs as they lost a case against levy of tax on capital gains they made. Jaitley said if the government did not tax FIIs, India would look like a haven. He further added that the amount involved is Rs 40,000 crore and I can change the face of India's irrigation with that Rs 40,000 crore. He also mentioned that government has abolished the MAT from April 1, 2015, but the demands pertain to tax related to earlier period and FIIs wanted it to be waived.

India introduced MAT in 1997 as a means of combating tax avoidance among domestic businesses. In its budget in February, the Indian government clarified that no FII would be liable for MAT after April 1, 2015. However, in the biggest-ever tax demand slapped on FIIs, nearly 100 foreign funds were asked to cough up an estimated $5-6 billion for 'untaxed gains' made by them in the domestic markets over the past years.

Till March 31, close to 100 FIIs got notices from the Tax Department for MAT of 20 per cent and were followed up with Assessment Orders. Foreign investors have said that the move goes against the government's stated position of providing a 'non-adversarial and stable tax regime'.

The CNX Nifty touched a high and low of 8,844.80 and 8,722.40 respectively.

The top gainers on Nifty were SSLT up by 2.39%, ONGC up by 1.68%, State Bank of India up by 1.29%, ACC up by 1.01% and Tata Power Company up by 0.81%. On the flip side, BHEL down by 4.84%, HCL Technologies down by 3.63%, Sun Pharmaceuticals Industries down by 3.12%, Mahindra & Mahindra down by 3.03% and Tata Motors down by 2.93% were the top losers.

European Markets were trading in the green; Germany's DAX was up by 0.50%, France's CAC was up by 0.72% and UK's FTSE 100 was up by 0.40%.

The Asian markets made mostly a negative close on Wednesday on weak economic data from China and growing concern about the ability of easier monetary policies to stimulate growth. The Chinese government reported that first-quarter gross domestic product grew 7 percent, the slowest pace since the 2009 global recession. Also, the International Monetary Fund has said that it sees Chinese expansion slowing even further to 6.8 percent this year and 6.3 percent in 2016. However, the Hang Seng markets managed a positive close. Hong Kong’s Index has surged 17 percent this year. Malaysian stocks too ended higher supported by gains in the construction sector led stocks.On the other hand Taiwanese market suffered sharp plunge of over a percent.