Indian equity markets continue trading in red; realty, power drag

Profit booking seems to have stopped in late morning trades as the frontline indices which appeared to be drifting below important psychological levels have recovered from day’s lows and are trading around the crucial 7,850 and 25,950 levels. The benchmarks were trading with losses of over a percent as sentiments turned pessimistic after BJP’s heavy defeat in Bihar state elections raised concerns about its ability to pass key reforms such as a goods and services tax, given the ruling coalition lacks a majority in the upper house of parliament. Disappointment over the pace of reforms has seen momentum wane for Indian shares, which are down about 14% since hitting a record high in early March. Besides, lower-than-expected quarterly earnings by some more bluechip companies also dampened the trading sentiment. However, losses remained capped with the report that majority of India Inc feels optimistic about the state of the economy improving in the next two quarters at the industry and firm level, although the last six months have not witnessed much of a change at the ground level.

On the global front, Asian stocks traded mostly lower in early trade, as a contraction in Chinese exports and worries over a likely Fed rate hike in December prompted investors to take quick profits, with Indonesia leading the pack amid a fall in the rupiah. Selling in large-caps led by domestic investors sent Jakarta's composite index, the region's best performer last week, down 1.5% to a near one-week low. Back on street, stocks from Consumer Durables and Auto counters were supporting the markets’ uptrend, while those from Realty, Power and TECK counters were adding to the underlying cautious undertone. In scrip specific development, Shares of Tata Motors have surged after Tata Motors-owned Jaguar Land Rover launched a new 4.5 billion pounds cost-cutting plan to offset rising emissions cost and the slowdown in China. On the flip side, shares of Sun Pharmaceutical Industries have dipped after the company reported a 46% year on year (YoY) dip in its consolidated net profit at Rs 1,107 crore for the quarter ended September 30, 2015 (Q2) due to lower sales growth, volatile currency movements and supply constraints.

The market breadth on BSE was negative, out of 2172 stocks traded, 1033 stocks advanced, while 1066 stocks declined on the BSE. 

The BSE Sensex is currently trading at 25970.92, down by 294.32 points or 1.12% after trading in a range of 25656.90 and 25992.31. There were 5 stocks advancing against 25 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.07%, while Small cap index up by 0.24%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.29% and Auto up by 0.59%, while Realty down by 1.92%, Power down by 1.25%, TECK down by 1.10%, IT down by 1.04% and Bankex down by 1.03% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 2.09%, Maruti Suzuki up by 1.99%, SBI up by 0.76%, Tata Steel up by 0.41% and Hero MotoCorp up by 0.06%. On the flip side, Sun Pharma down by 4.66%, BHEL down by 3.34%, Dr. Reddys Lab down by 2.52%, ICICI Bank down by 2.30% and Coal India down by 2.12% were the top losers.

Meanwhile, in a bid to provide a boost to the clean India initiative, the government has decided to impose a 0.5 percent cess on all taxable services which are presently liable to service tax, to fund the Swachh Bharat programme. This tax will come into effect from November 15, 2015.

Finance Minister Arun Jaitley in Budget 2015-16 had proposed to levy a Swachh Bharat cess of up to 2 percent 'on all or certain services, if need arises”.  The decision to impose 0.5 percent cess will translate into a tax of 50 paise on every Rs 100 worth of taxable services. The additional cess would be over and above the 14 percent Service Tax rate which is already being levied and may yield the government an additional about Rs 400 crore during the remainder of the current fiscal. The government had in Budget 2015-16 estimated to collect over Rs 2.09 lakh crore from service tax.

Although finance minister Arun Jaitley had not announced the list of services that would face the latest cess, but the government has opted for an across-the-board load on consumers. Everything from mobile bills to eating out in air-conditioned restaurants, a visit to a spa, air travel, dry cleaning charges, banking and coaching classes fees are set to get more expensive with the government’s decision.

The proceeds from this cess will be exclusively used for Swachh Bharat initiatives. Swachh Bharat is among the major initiatives of the Modi government, which has embarked on a major drive to ensure cleanliness across the country.

The CNX Nifty is currently trading at 7863.10, down by 91.20 points or 1.15% after trading in a range of 7771.70 and 7870.70. There were 8 stocks advancing against 42 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 2.15%, Maruti Suzuki up by 2.03%, Bank of Baroda up by 1.65%, PNB up by 1.50% and SBI up by 0.91%. On the flip side, Sun Pharma down by 4.59%, Idea Cellular down by 3.19%, BHEL down by 3.11%, Cairn India down by 2.69% and Dr. Reddys Lab down by 2.63% were the top losers.

Asian markets were trading in mostly red, Taiwan Weighted was down by 0.57%, Jakarta Composite down by 1.52%, KOSPI Index down by 0.7% and FTSE Bursa Malaysia KLCI was down by 0.2%. On the flip side, Hang Seng was up by 0.11%, Shanghai Composite up by 2.01% and Nikkei 225 was up by 2%.