Post Session: Quick Review

Indian markets lost their way after a good opening on Monday, making a subdued start of the new week and declining for the fourth straight session. Traders who were initially encouraged by the good going in the global markets and with the committee headed by Arvind Subramanian on goods and services tax (GST) rates coming up with an amicable solution to the ongoing confrontation of the government and the Opposition, suggesting 17-18 percent GST rate and dropping of the one per cent additional tax on inter-state sales. Industry bodies FICCI and Assocham too welcomed the recommendations put forth by the Arvind Subramanian panel and said rollout of the tax reform will add 2 percent to India's growth and usher in efficiency and transparency in the indirect tax regime.  But markets turned red in the very second hour of trade tracking weakness in FMCG, metal, PSU banking and select auto stocks. Traders remained concerned ahead of the US Federal Reserve's meeting next week, where it is widely expected to raise rates for the first time in about a decade.

The global markets remained mostly in a cheerful mood after the rally of US markets, as the consensus firmed for December Fed hike after payrolls data, the Asian markets too followed the trend and barring two major indices in the region, all ended in green, led by the Japanese markets which surged around a percent, ahead of the Bank of Japan’s governor speech, as the divergence in global monetary policy becomes more stark. The European markets too made a strong start, with some of the indices surging by over a percent after a solid jobs report from the US. Also, ECB President Mario Draghi commented that quantitative easing was unlimited. There is no particular limit to how we can deploy any of our tools.

Back home, markets showed some signs of recovery in the final hours of trade, with benchmarks coming off their day’s low, but it was not sufficient to pull the markets back in green. Traders drew some comfort with Fitch Ratings affirming India's Long-Term Foreign- and Local-Currency Issuer Default Ratings at 'BBB-', while the Outlooks on the Long-Term IDRs are Stable. The Country Ceiling is affirmed at 'BBB-' and the Short-Term Foreign-Currency IDR at 'F3'. Outlook balances a strong medium-term GDP growth outlook and favourable external finances, including a strong foreign reserves buffer, with a high government debt burden and weak structural features, including a difficult - but improving - business environment. India's positive GDP growth outlook stands out globally. Also, the rupee strengthened a bit against the US dollar after better-than-expected jobs data in the US made a Fed liftoff in December look almost certain, easing some uncertainty over the pending policy decision. However, the GST continued impacting the market movement throughout the day, with the cigarette manufacturers suffering sharp cuts. ITC slumped by around 7 per cent, VST Industries fell over 3 per cent and Godfrey Philips was down by over 5 per cent after the government-appointed Arvind Subramanian panel recommended a steep 40 per cent tax on tobacco products. On the other hand good demand was seen in logistics companies such as Aegis Logistics, Allcargo Logistics, Blue Dart, Container Corp, Gateway Distriparks and Gati, as they would be direct beneficiary of the implementation of GST.

The BSE Sensex ended at 25531.49, down by 106.62 points or 0.42% after trading in a range of 25477.69 and 25785.53. There were 15 stocks in green against equal number of stocks in red on the index. (Provisional)

The broader indices made a mixed closing; the BSE Mid cap index ended down by 0.14%, while Small cap index gained 0.17%. (Provisional)

The top gaining sectoral indices on the BSE were Realty up by 0.62%, Bankex up by 0.35%, TECK up by 0.29%, IT up by 0.26%, Consumer Durables up by 0.03%, while FMCG down by 2.55%, Metal down by 0.81%, PSU down by 0.74%, Oil & Gas down by 0.34%, Auto down by 0.30% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Sun Pharma Inds. up by 2.82%, Hindustan Unilever up by 2.04%, Lupin up by 1.45%, HDFC up by 1.34% and Tata Steel up by 1.17%. On the flip side, ITC down by 6.56%, Coal India down by 2.30%, ONGC down by 1.36%, Reliance Industries down by 1.32% and Maruti Suzuki down by 1.00% were the top losers. (Provisional)

Meanwhile, apex industry body, The Associated Chambers of Commerce of India (ASSOCHAM) has welcomed the report of Chief Economic Advisor (CEA) Arvind Subramanian- led panel recommending standard GST rate of 18 percent and lower rate of 12 percent on specified goods stating that this rate structure is quite appropriate and will be anti-inflationary for indigenous goods, though the cost of services will go up including some essential services like banking, telecom and information technology (IT).

Further, ASSOCHAM said that the removal of one per cent additional tax is a welcome step as it will remove the cascading effect on cost of indigenous production by four to six per cent as goods move four to six times during entire value chain and said that the higher rate should only be applicable to sin goods. ASSOCHAM fully supports the CEA`s view that rates can`t be put in the Constitution Amendment Bill to make the rates inflexible, however the chamber feels that rates should be stable and predictable to attract investments.

A key government committee headed by Arvind Subramanian on goods and services tax (GST) has suggested a standard GST rate of 17-18 percent and dropping of the one per cent additional tax on inter-state sales. It recommended 12 percent for 'low rate goods' and 40 percent for demerit goods. For precious metal, it recommended a range of 2-6 percent. Also, the panel recommended early inclusion of alcohol and petroleum products in GST, stating that bringing alcohol and real estate within the scope of the GST would further the government's objectives of improving governance and reducing black money generation without compromising on states' fiscal autonomy.

The CNX Nifty ended at 7765.50, down by 16.40 points or 0.21% after trading in a range of 7746.05 and 7825.40. There were 28 stocks on gainers side against 22 stocks on losers side on the index. (Provisional)

The top gainers on Nifty were Asian Paints up by 4.59%, Sun Pharma Inds up by 2.86%, Hindustan Unilever up by 2.19%, Tech Mahindra up by 1.82% and Lupin up by 1.57%. On the flip side, ITC down by 6.53%, Coal India down by 2.45%, Cairn India down by 2.33%, ONGC down by 1.36% and Reliance Industries down by 1.33% were the top losers. (Provisional)

European markets were trading higher, UK’s FTSE 100 increased 47.89 points or 0.77% to 6,286.18, France’s CAC gained 82.12 points or 1.74% to 4,796.91 and Germany’s DAX was up by 217.8 points or 2.03% to 10,969.90.

Asian equity markets ended mostly in green on Monday following a positive US jobs report which showed that 211,000 jobs were created by the US economy in November beat market expectations, which cleared the way for the US Federal Reserve to raise interest rates next week for the first time since 2006. Although some gains were tempered by low oil prices and caution ahead of a slew of Chinese data due this week. Japanese market rallied as a weaker yen bolstered exporters' shares. China stocks edged up, with investors rotating from property companies back into tech and healthcare, sectors that Beijing hopes will be new engines of growth. A slew of data in coming weeks including trade data, consumer and producer price indexes, industrial production and retail sales are likely to show China's economic performance remains sluggish, reinforcing expectations that Beijing will implement more stimulus measures in coming months. Hong Kong shares ended fractionally lower, led by a tumble in energy heavyweights as investors worried about persistent weakness in oil prices.