Benchmarks reverse gears; slip into negative territory in absence of positive triggers

Reversing gears, Indian equity markets have now slipped into negative territory in absence of positive triggers which could take the markets higher and sustained selling in frontline line blue-chip stocks. The sentiments were distrustful on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 1,699.60 crore on May 06, 2015. Concern over surging oil prices and a growing rift between Greece and its creditors over bailout terms also spooked investors. Holding slender loss, both Sensex and Nifty were trading above their crucial 26,700 and 8,050 levels respectively. Further, shares of mid and small-sized companies were too under pressure with both the mid-cap and small-cap indices down over 0.35% each on the bourses. Market participants also remained cautious about the doubtful passage of the Goods and Services Tax (GST) Bill, which though cleared a key hurdle in Parliament, when it was passed in Lok Sabha but is likely to be brought before the Rajya Sabha today, where the Bharatiya Janata Party-led NDA is in a minority, with just 62 members in a 245-member house. However, losses remained capped as International Monetary Fund (IMF) in its latest economic health check report termed ‘India as the fastest growing economies in the world’, by estimating its growth rate at 7.5% this year and the next.

On global front, Asian stocks continued to head south early Thursday on the back of a confluence of factors, which includes a weaker finish on Wall Street overnight, growth worries in Australia and jitters over tighter margin trading rules in China. Back home, extending its slide for the fifth straight day, the rupee weakened by another 34 paise to 63.87 against the dollar in early trade on sustained capital outflows amid a weakening trend in equities.

Back on street, stocks from IT and Teck counters were supporting the markets’ uptrend, while those from Oil & Gas, Metal and Banking counters were adding to the underlying cautious undertone. In scrip specific development, Shares of KEC International surged after reporting a strong 83% year-on-year (yoy) growth in consolidated net profit at Rs 63 crore for the quarter ended March 2015 (Q4). Furthermore, Shoppers Stop rose on plan to invest Rs 50 crore in its e-commerce business in the next two years, expecting the new channel to generate 10 per cent of its annual turnover.

The market breadth on BSE was negative, out of 2156 stocks traded, 827 stocks advanced, while 1245 stocks declined on the BSE.

The BSE Sensex is currently trading at 26704.92, down by 12.45 points or 0.05% after trading in a range of 26570.56 and 26850.37. There were 13 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.97%, while Small cap index down by 0.39%.

The gaining sectoral indices on the BSE were IT up by 1.30% and TECK up by 1.15%, while Oil & Gas down by 1.50%, Metal down by 0.92%, Bankex down by 0.91%, Power down by 0.81% and Infrastructure down by 0.80% were the losing indices on BSE.

The top gainers on the Sensex were TCS up by 2.50%, Bajaj Auto up by 2.31%, Bharti Airtel up by 1.78%, Hero MotoCorp up by 1.55% and Infosys up by 1.34%. On the flip side, Hindalco down by 3.34%, Dr. Reddys Lab down by 1.97%, Reliance Industries down by 1.77%, GAIL India down by 1.76% and ICICI Bank down by 1.57% were the top losers.

Meanwhile, moving a step forward in implementing the biggest tax reform in decades, the Goods and Services Tax (GST) cleared a key hurdle in Parliament, when it was passed in Lok Sabha. The main opposition, Congress walked out of the Lower House after the government turned down its demand to send the bill to a standing committee, making a cakewalk for the Lok Sabha approval for the Constitution (122nd Amendment) (GST) Bill, 2014. The bill is likely to be brought before the Rajya Sabha on Thursday before the budget session ends on 13 May, where the Bharatiya Janata Party-led NDA is in a minority, with just 62 members in a 245-member house.

Finance Minister Arun Jaitley hailing the bill as the biggest reform in India since Independence in 1947, said that it could add up to 2 percentage points to the growth of Asia's third-largest economy. Once enacted, all goods and services with the exception of alcohol, will come under GST’s ambit. Several compromises have been made on the Bill, the GST won’t apply to alcohol and petroleum products will be taxed separately at first, while the manufacturing states will be allowed to levy an additional tax of 1% on supply of goods.

A government think-tank had proposed the tax rate be set at 27%, but in his reply to the debate on the bill, Jaitley conceded that a 27% revenue-neutral GST rate will be very high and indicated that the proposed GST rate will be much lower than the 27% figure that has been mentioned. He further added that “neither the state finance ministers nor the central government are interested in imposing higher taxes on our own people. Therefore, this figure is going to be much more diluted. These are rates that will be decided by the GST council itself.”

GST will replace a multitude of central taxes like excise duty and service tax and state levies such as octroi, sales, value-added, entertainment and purchase taxes and expected to broaden the tax base, sharpen the competitive edge of Indian exports by removing several tax distortions and create a unified national market by removing inter-state barriers to trade. The centre has included a provision in the bill that assures states compensation for five years for losses arising from GST implementation. States will be compensated for 100% of their losses in the first three years, 75% in the fourth year and 50% in the fifth year.

The CNX Nifty is currently trading at 8072.90, down by 24.10 points or 0.30% after trading in a range of 8034.50 and 8122.60. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were TCS up by 2.47%, Bajaj Auto up by 2.36%, Bharti Airtel up by 1.72%, HCL Tech up by 1.33% and Hero MotoCorp up by 1.31%. On the flip side, Hindalco down by 3.74%, NMDC down by 2.14%, Reliance Industries down by 2.09%, Lupin down by 2.04% and Indusind Bank down by 1.98% were the top losers.

All the major Asian markets were trading in red, Nikkei 225 slumped 1.15%, Hang Seng lost 0.58%, Taiwan Weighted declined by 0.92%, Shanghai Composite lost 1.41%, Straits Times was lower by 0.76%, KOSPI Index lost 0.82%, Jakarta Composite was down by 0.27% and FTSE Bursa Malaysia KLCI declined by 0.22%.