Benchmarks crash like house of card; Nifty breaches 8,100 mark

Indian equity benchmarks witnessed bloodbath and crashed like house of card with key gauges losing over two and a half percent on Wednesday as weak corporate earnings in the fourth quarter and a general lack of positive cues kept traders risk-averse. Selling was both brutal and wide-based as none of sectoral indices on BSE were spared and frontline indices ended below their crucial 8,100 (Nifty) and 26,800 (Sensex) levels. Counters, which featured in the list of worst performers, include capital goods, realty, banking, power and public sector undertaking.
 
Meanwhile, traders remained concerned ahead of political developments, as a face-off between the opposition and government over the Goods and Services Tax (GST) bill is likely with the Congress and some other opposition parties insisting that it be sent to the Parliamentary Standing Committee for scrutiny. Sentiments also remained dampened on report that the HSBC India Services Business Activity Index, which tracks changes in activity at Indian service companies on a monthly basis, eased to 52.4 in April from 53 in March.

On the global front, European equity indexes rebounded in choppy trade and were trading in green in early deals on Wednesday as strong euro zone services data and corporate results offset a sell-off in the region’s government bonds and a rise in the euro. However, Asian stocks stumbled on Wednesday following with weak US markets as equities investors were spooked by a vicious sell-off in sovereign bonds globally.

Back home,  investors failed to draw any sense of relief with an HSBC report that India’s GDP growth is likely to pick up pace and expand by 7.8 percent during this fiscal and higher next year on the back of improved urban consumption. Also, traders failed to draw any solace from Jayant Sinha’s statement that benign oil prices, likely monetary policy easing by the Reserve Bank of India (RBI) and lower inflation will help the Indian economy to grow in the range of 8.1- 8.5 per cent in the current fiscal.

Depreciation in Indian rupee too dampened the sentiments. Rupee was trading at 63.57 per dollar at the time of equity markets closing compared with its previous close of 63.44 per dollar. Selling in real-estate counter too weighed down sentiments on reports that a united opposition forced the government to put off indefinitely the real estate bill. Additionally, shares of public sector oil marketing companies (OMCs) declined as global crude oil prices rose.

The NSE’s 50-share broadly followed index Nifty declined by around two hundred and thirty points and ended below the psychological 8,100 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex tumbled by over seven hundred and twenty points to finish below the psychological 26,800 mark. Broader markets too witnessed carnage during the trade and ended the session with a cut of over three percent. The market breadth remained in favour of decliners, as there were 590 shares on the gaining side against 2,147 shares on the losing side while 110 shares remain unchanged.

Finally, the BSE Sensex plunged by 722.77 points or 2.63% to 26717.37, while the CNX Nifty dropped by 227.80 points or 2.74% to 8,097.00.

The BSE Sensex touched a high and a low of 27501.15 and 26677.64, respectively. The BSE Mid cap index was down by 3.28%, while Small cap index down by 3.12%.

The only gainer on the Sensex was Bharti Airtel up by 0.80%. On the flip side, BHEL down by 6.21%, ICICI Bank down by 4.95%, Larsen & Toubro down by 4.68%, Maruti Suzuki down by 4.20% and NTPC down by 4.09% were the top losers.

The losing sectoral indices on the BSE were Capital Goods down by 4.24%, Realty down by 4.04%, Power down by 3.67%, Bankex down by 3.66% and PSU down by 3.59%, while there were no gainers.

Meanwhile, clarifying the doubts raised regarding the Income Computation and Disclosure Standards (ICDS), the Finance Ministry has said that LPG subsidy received by individuals in their bank accounts will continue to be exempt from income tax. The Ministry said that the provision in the Finance Bill, 2015, will not affect the LPG subsidy and other welfare subsidies received by individuals. The ministry release stated that to restate the position, the provision in the Finance Bill, 2015, will not affect the LPG subsidy and other welfare subsidies received by individuals.

There were doubts being raised by tax experts over an amendment in Finance Bill, 2015 that expanded the definition of taxable income to include subsidies, grants, cash incentive and duty drawback. The Finance Bill, 2015 passed by Lok Sabha on April 30 proposes to align the definition of income with that provided in ICDS for this purpose. The central government notifies ICDS for any class of assesses or for any class of income.

The ministry has further clarified that the ICDS is applicable to persons having income chargeable under the head 'Profits and gains of business or profession' or 'Income from other sources' and following Mercantile System of Accounting. The Central Board of Direct Taxes (CBDT) notified ICDS on 31.3.2015 vide Notification number S.O. 892 (E) after wide consultations with the stakeholders for which the draft was placed in the public domain. Sub-section (2) of section 145 provides that the Central Government may notify ICDS for any class of assesses or for any class of income.

The CNX Nifty touched a high and low of 8,331.95 and 8,083.00 respectively.

The only gainer on Nifty was Bharti Airtel up by 0.59%. On the flip side, Bharat Heavy Electricals down by 6.02%, Kotak Mahindra Bank down by 5.45%, Ambuja Cements down by 5.43%, Bank of Baroda down by 5.12% and ICICI Bank down by 4.96% were the top losers.

European Markets were trading in the green; France's CAC was up by 0.51%, UK’s FTSE was up by 0.26% and Germany's DAX was up by 0.35%.

The Asian markets closed mostly in red on Wednesday, while Japanese stock exchange was closed today on account of ‘Greenery Day’ holiday. The devaluation of currencies by some countries has led to sharp gains in the yuan which are hurting the competitiveness of Chinese exports. The Ministry of Commerce stated that China’s economy still faces challenges this year, and that its trade flows, especially exports, are under increased pressure.  China’s services sector grew at its fastest pace this year in April as a sizzling stock market rally helped boost consumer confidence and spending.  Yet in a sign that China’s economy still faces strong headwinds, the HSBC/Markit China Services Purchasing Managers’ Index (PMI) showed final prices of services hit a 15-month low in April as some firms were forced to cut prices to lift sales. The services PMI rose to a four-month high of 52.9 in April from 52.3 in March, comfortably above the 50-point level that separates expansion from a contraction in activity on a monthly basis. Indonesian GDP fell to a seasonally adjusted annual rate of 4.71%, from 5.01% in the preceding month.