D-Street climbs as upbeat inflation data outweighs Moody’s euro-zone downgrade

Indian stock markets staged a smart performance on Tuesday as the frontline indices settled above important psychological levels and extended the gaining streak for the second straight session. The climb of around half a percentage point for the benchmarks appeared even more prominent given the fact that the gains came on a day when equity indices largely across Asia exhibited pessimistic trends after global rating agency Moody's announced a slew of credit rating downgrades of European nations. Investors at large took to risk aversion after the agency kept the coveted AAA credit rating for France and the UK on negative watch while it downgraded the ratings of Italy, Portugal, Spain, Slovakia, Slovenia and Malta. However, the encouraging WPI inflation numbers for January provided the much needed support to the local markets and prevented downside chances for the bourses. The wholesale price index slowed to its lowest level in more than two years in January to 6.55% against 7.47% in December. Investors piled up positions in the rate sensitive counters like Realty, Banking and Auto post the announcement of better than expected inflation numbers on expectations that the pressure on RBI will now increase to cut rates to prop up the country's economy growth momentum. On the earnings front, Tata Motors got commended for its better than expected third quarter numbers and rallied close to four percent in the session. On the global front, Asian markets settled on weak note while the European counterparts traded in the green territory as encouraging German economic data outweighed concerns over Moody’s rating downgrades.

Earlier on the Dalal Street, the benchmark got off to a negative opening as investors largely remained influenced by the pessimistic sentiments prevailing in Asian markets. After the weak opening, the frontline indices gained some steam and clawed back into the green terrain. The gauges kept see-sawing in a very tight band through the day’s trade as the bourses remained in the consolidation mode. However, hefty buying in the dying moments of trade helped the main gauges to climb above key levels by the end. The NSE’s 50-share broadly followed index Nifty, settled with half a percent gains above the crucial 5,400 support level while Bombay Stock Exchange’s Sensitive Index or Sensex added seventy five points and ended below the psychological 17,850 mark. Moreover, the broader markets showed resilience and finished the session with strong gains of around a percent, outperforming their larger peers. On the BSE sectoral space, Capital Goods counter remained the top gainer in the space with gains of over two percent followed by the rate sensitive counters. On the flipside, only the defensive Healthcare and Oil & Gas sectors went home with marginal losses. The markets gained on good volumes of over Rs 1.52 lakh core while the turnover for NSE F&O segment remained on the lower side as compared to that on Monday at over Rs 1.03 lakh crore. The market breadth was positive as there were 1,619 shares on the gaining side against 1,269 shares on the losing side while 120 shares remained unchanged.

Finally, the BSE Sensex gained 75.73 points or 0.43% to settle at 17,848.57, while the S&P CNX Nifty rose by 25.85 points or 0.48% to close at 5,416.05.

The BSE Sensex touched a high and a low of 17,890.33 and 17,742.58 respectively. The BSE Mid cap and Small cap indices up by 1.15% and 0.83% respectively.

The major gainers on the Sensex were L&T up 3.87%, Tata Motors up 3.74%, SBI up 3.26%, Maruti Suzuki up 3.24% and Hindalco Industries up 3.18%. While, Cipla down 6.28%, Tata Power down 3.61%, ONGC down 1.67%, Bharti Airtel down 1.45% and Jindal Steel down 0.88%, were the major losers on the index.

The top gainers on the BSE sectoral space were Capital Goods (CG) up 2.30%, Realty up 2.29%, Auto up 2.14%, Bankex up 0.81% and Consumer Durables (CD) up 0.65%, while Health Care (HC) down 0.57% and Oil & Gas down 0.21% were top losers on the sectoral space.

Meanwhile, in order to make the road transport system hassle free and harmonize the rates to facilitate easy movement of vehicles across the country, the government has suggested a one-time road tax of 6% be levied on the sale price of cars and two-wheelers instead of the present system where the quantum of tax varies from state to state. An online system for tax collection has also been proposed. Waiving of permit fee for tourist vehicles due to low collection has also been suggested.

A meeting between the Transport Development Council (TDC) and Transport Ministers from various State Governments / Union Territories was held recently under the chairmanship of the Union Minister for Road Transport & Highways C P Joshi. It was consensually decided to bring the floor rate of motor vehicle taxes for cars and two wheelers at 6% using sale price as the base rate.

However, the other important issue pertaining to motor vehicle taxes being paid by private cars vis-à-vis taxies/maxis remained inconclusive. It has been felt that in order to reduce barriers on inter-state movement of vehicles for goods and passengers, the motor vehicle tax must be simplified. However, due to differences in opinion amongst the participating members Joshi recommended that the issue be referred to the Empowered Group of Ministers of States who would submit their report in two months.

It was also decided to increase the national permit fee for trucks and goods vehicles by 10% to Rs 16,500 per vehicle annually, to be reviewed after two years, after the States complained of a loss of revenue due to the consolidated fee received by them under the new National Permit Scheme as compared to the revenue earned by them in the earlier system.

At present, road taxes charged by states on cars and two-wheelers vary from 2% to 18%. While some states levy a lifelong road tax, annual levies prevail in others. Delhi also charges a parking fee as part of tax. There are also significant variations in tax rates based on fuel, sale price of vehicle and engine capacity in many states.

As per Joshi, the sector has to adopt information technology (IT) solutions for providing seamless movement of vehicles across states which will reduce transaction costs involved in the movement of goods. He said, ‘with this objective in mind, there is a need to rationalize the existing motor vehicle taxation system in order to reap benefits of technology.’

The S&P CNX Nifty touched a high and low of 5,428.05 and 5,377.95 respectively.

The top gainers on the Nifty were RCOM up 5.69%, Tata Motors up 5.56%, L&T up 5.21%, Maruti Suzuki up 3.67% and Hindalco up 3.59%.

On the flip side, Cipla down 5.96%, Tata Power down 3.33%, Siemens down 1.94%, ONGC down 1.73% and Bharti Airtel down 1.62% were the top losers on the index.

The European markets were trading in green as France's CAC 40 up 0.30%, Britain’s FTSE 100 up 0.17% and Germany's DAX up by 0.64%.

Asian stock markets snapped the day’s trade on mixed note on Tuesday after ratings agency Moody’s slapped credit downgrades on six European Union countries due to the region's weak economic outlook and uncertain attempts to implement reforms. Moody's Investor Service on Monday downgraded its credit ratings on Italy, Portugal and Spain. France, Britain and Austria kept their top ratings but had their outlooks dropped to negative from stable. Moody's also cut its ratings on the smaller nations of Slovakia, Slovenia and Malta. All nine countries are members of the European Union.

Meanwhile, Japanese Nikkei 225 index, reversing early morning losses, rose 0.60 percent. The gains came as the Bank of Japan, following a policy meeting, announced it would buy more government bonds while keeping short-term interest rates near zero to boost the economy.