Benchmarks trade at the highest point of the day

Indian equity markets added gains to continue firm trade hovering near the highest point of the day in the late afternoon session on account of buying in front line blue chip counters. The sentiments were on optimistic note after Finance Minister Arun Jaitley stated that India’s economic growth is expected to exceed 7.3 percent in the current fiscal year and go higher still in the next one. The growth would come despite rural demand been impacted by lower rains in the last two years. Investors got some encouragement with Prime Minister Narendra Modi’s statement that FDI into India has increased by 40 percent since last year, showing the increasing global confidence in the country. Traders were seen piling position in Bankex, Capital Goods and FMCG stocks, while selling was witnessed in IT and TECK sector stocks. In the scrip specific development, GMR Infrastructure was trading firm after the company reported that its consolidated net loss in July-September quarter narrowed to Rs 398.67 crore. Apollo Tyres was trading in green after it acquired Reifencom GmbH, one of the largest tyre distributors in Germany, for euro 45.6 million amounting around Rs 301 crore.

On the global front, the Asian markets were trading mostly in red, while the European markets were trading mostly on pessimistic note. Back home, the NSE Nifty and BSE Sensex were trading above the psychological 7,800 and 25,700 levels respectively. The market breadth on BSE was positive in the ratio of 1297:1207 while 155 scrips remained unchanged.

The BSE Sensex is currently trading at 25790.86, up by 180.33 points or 0.70% after trading in a range of 25451.42 and 25791.37. There were 22 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.13%, while Small cap index up by 0.43%.

The gaining sectoral indices on the BSE were Bankex up by 1.28%, Capital Goods up by 1.22%, FMCG up by 0.57%, Realty up by 0.43%, Consumer Durables up by 0.39% while, IT down by 0.83%, TECK down by 0.66% were the losing indices on BSE.

The top gainers on the Sensex were Dr. Reddy’s Lab up by 3.30%, Tata Steel up by 2.72%, Mahindra & Mahindra up by 2.56%, ITC up by 2.41% and SBI up by 2.39%.

On the flip side, Coal India down by 1.67%, Infosys down by 1.39%, TCS down by 1.12%, Hindustan Unilever down by 1.08% and Tata Motors down by 0.78% were the top losers.

Meanwhile, with the government’s announcement to allow foreign direct investment (FDI) through the automatic route in limited liability partnerships (LLPs), the Multinationals registered as companies in India are lobbying the government to freely permit their conversion to LLPs. The External commercial borrowings (ECBs) could rise if the relaxations are extended to existing multinationals. Besides, the new regulations have also allowed 'downstream investments' in LLPs operating in India by their parents.

Any company with an annual turnover of more than Rs 60 lakh in India can convert itself into an LLP but this process is fraught with complications as well as tax implications. Besides, the approval of the Foreign Investment Promotion Board (FIPB) is also needed. The government has made the changes because it sees that this is a way to greater investment from overseas.

Recently, revenue secretary Hasmukh Adhia has met executives and consultants to get a view on conversion to LLPs. If the majority of the economic interest (50 per cent) in an organisation remains the same for next five years, the relaxation could be looked at. According to ministry of corporate affairs data, in all there are 11,616 LLPs registered in India, in which less than 1 per cent were conversions from companies to LLPs by multinationals. Views were being raised that the conversion needs to be made specifically tax exempt to remove a major roadblock for existing companies to convert to LLP, while the Conversion of a company to LLP should be treated as other restructuring activities like amalgamations and demergers. However, the argument against such a relaxation is that the process can't be treated differently from others.

In many circumstances, LLP is a preferred form of organisation, mainly due to  lesser regulatory compliances vis a vis companies, and inordinately heavy liabilities of directors of companies and inapplicability of dividend distribution tax to LLPs. LLPs are exempted from this along with other levies such as minimum alternate tax or MAT. Many Indian companies could also look at a possible conversion if the rules were to be relaxed.

The CNX Nifty is currently trading at 7815.75, up by 53.50 points or 0.69% after trading in a range of 7714.15 and 7816.15. There were 36 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were Dr. Reddy’s Lab up by 3.35%, Tata Steel up by 2.69%, Mahindra & Mahindra up by 2.66%, IndusInd Bank up by 2.55% and ITC up by 2.46%.

On the flip side, Tata Power down by 1.90%, Coal India down by 1.63%, Infosys down by 1.34%, TCS down by 1.14% and Hindustan Unilever down by 1.09% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 385.32 points or 1.72% to 22,010.82, Nikkei 225 decreased 203.22 points or 1.04% to 19,393.69, Jakarta Composite decreased 37.09 points or 0.83% to 4,435.75, Taiwan Weighted decreased 34.1 points or 0.41% to 8,295.40, KOSPI Index decreased 30.27 points or 1.53% to 1,943.02 and FTSE Bursa Malaysia KLCI decreased 1.04 points or 0.06% to 1,657.87.

On the other hand, Shanghai Composite increased 26.12 points or 0.73% to 3,606.96.

The European markets were trading mostly in red; Germany’s DAX decreased 32.27 points or 0.3% to 10,676.13, France’s CAC decreased 19.35 points or 0.4% to 4,788.60 while, UK’s FTSE 100 increased 1.16 points or 0.02% to 6,119.44.