Benchmarks make soft start; Nifty slips below 8,450 mark

Indian equity benchmarks have made a weak start and are trading with a cut of around half a percent in early deals on Monday as traders remained cautious about the probable rate hike in the US by year end. Meanwhile, Finance Minister Arun Jaitley too has said that inflation has been brought under control in the past one year but global economy and agrarian situation as well as domestic investments pose challenge to the Indian economy. Selling in FMCG counter too dampened the sentiments, with ITC leading the fall. The FMCG major has dipped around 2% to in early morning trade after reporting a lower-than-expected 3.7% year-on-year (y-o-y) growth in its net profit at Rs 2,361 crore for the fourth quarter ended March 2015 (Q4) due to muted growth in cigarette business and decline in agri segment.

On the global front, the US markets ended lower in last session, jittered by the Fed chief Janet Yellen’s remarks that Fed will likely raise interest rates this year, as long as economic activity picks up. The Asian markets were trading mostly in the green at this point of time, led by the Japanese market which surged on weaker yen and as exports rose more than forecast in April. Exports rose 8 percent from a year earlier, while Imports slid 4.2 percent.

Back home, on the sectoral front, oil and gas, public sector undertaking and infrastructure witnessed the maximum gain in trade, while fast moving consumer goods, metal and capital goods remained the top losers on the BSE. The broader indices, however, were out performing benchmarks, while the market breadth on the BSE was posittive; there were 963 shares on the gaining side against 893 shares on the losing side while 90 shares remain unchanged.

The BSE Sensex is currently trading at 27834.43, down by 123.07 points or 0.44% after trading in a range of 27814.10 and 27903.29. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.12%, while Small cap index traded higher by 0.16%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 0.83%, PSU up by 0.26%, INFRA up by 0.19%, TECK up by 0.10% while, FMCG down by 0.91%, Metal down by 0.68%, Capital Goods down by 0.51%, Consumer Durables down by 0.35%, Bankex down by 0.29% were the losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 1.28%, ONGC up by 1.22%, Mahindra & Mahindra up by 1.10%, Hindalco up by 0.51% and NTPC up by 0.26%. On the flip side, Vedanta down by 1.88%, ITC down by 1.84%, Tata Steel down by 1.29%, Hindustan Unilever down by 1.18% and Tata Motors down by 1.17% were the top losers.

Meanwhile, in order to make ‘arm’s length pricing’ determination more reasonable in transfer pricing cases Central Board of Direct Taxes (CBDT) has come up with draft rules for introduction of ‘range concept’. The tax department has proposed to use multiple year data for determining the Arm's Length Price against the current practice of taking into account only one year data for calculating Arm's Length Price. The use of multiple year data is expected to provide relief to the companies on account of difficulty to provide comparable data for the immediate previous year.

The draft norms of range concept, which will be used for determination of Arm’s length price of goods and services traded between related entities, would be open for comments till May 31, 2015. Notably, since its introduction in 2001, transfer pricing regulations have always been a major area of litigation between the tax department and tax payers, which are mainly MNCs, who usually blame the tax department of being aggressive in imposition of taxes to garner more revenues.

The draft norms follow an announcement by Finance Minister Arun Jaitley in his 2014 Budget with a view to aligning transfer pricing regulations in India with the best available practices. It remains to be clarified that the 'range concept' will only apply where a minimum of nine comparable data about similar transactions are available. In case the number of comparable data is inadequate, the existing provision of 'arithmetic mean concept' would apply.

The CNX Nifty is currently trading at 8424.85, down by 34.10 points or 0.40% after trading in a range of 8414.95 and 8441.95. There were 16 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were BPCL up by 2.45% and Lupin up by 2.16% and Bharti Airtel up by 1.33% and Mahindra & Mahindra up by 1.14% and ONGC up by 1.05%. On the flip side, Ambuja Cement down by 2.32%, ITC down by 2.08%, Asian Paints down by 1.77%, Vedanta down by 1.41% and Tata Power down by 1.38% were the top losers.

Most of the Asian equity indices were trading in the green; Straits Times increased 8.65 points or 0.25% to 3,458.83, KOSPI Index surged 23.29 points or 1.1% to 2,146.10, Shanghai Composite soared 108.09 points or 2.32% to 4,765.68, Nikkei 225 gained 146.75 points or 0.72% to 20,411.16 and Hang Seng was up by 469.11 points or 1.7% to 27,992.83.

On the flip side, Jakarta Composite decreased 20.67 points or 0.39% to 5,294.49, FTSE Bursa Malaysia KLCI declined 17.53 points or 0.98% to 1,769.97 and Taiwan Weighted was down marginally by 0.09 points to 9,638.71.