Benchmarks add losses; Nifty slips below 7900 mark

Indian bourses adding losses, continued to trade in red in the late morning session, with the Sensex losing around 300 points and Nifty falling below the 7900 level, on account of selling in front line stocks.  Sentiments remained down-beat on the report that Indian manufacturing activity contracted in December for the first time in more than two years, hurt by softening domestic demand, adding pressure on the central bank to ease policy. Nikkei's Manufacturing Purchasing Managers' Index, compiled by Markit, fell to a 28-month low of 49.1 in December from November's 50.3. Furthermore, former Finance Minister P Chidambaram stated that the government has not been able to fulfill its promises, also weighed on the sentiment. He also argued that since the GDP growth for 2015-16 is not likely to be higher than 7% to 7.3%, the economy is stuck in a groove. However, investors got some support with Chief Economic Advisor Arvind Subramanian’s statement that India has emerged as the world's fastest growing economy notwithstanding global demand slowdown and four droughts. He also said that there has been improvement in quality of spending toward capital and agriculture, fiscal consolidation at central and state levels and improvement in indirect tax efficiency. Meanwhile, some Cement companies like JK Cement, Ultratech Cement and Ramco Cements came under pressure after the report that average cement prices declined by 7.3 per cent in December 2015 compared to the same month in the previous year mainly due to weak demand.

On the global front, Shares across Asia tumbled on Monday, the first trading day of the year, as a worse-than-expected Chinese manufacturing report and escalating Middle East tension saw investors shun riskier assets. China Caixin Manufacturing PMI for Dec was lower than expectations at 48.2 as operating conditions faced by Chinese goods producers continued to deteriorate in December. Production declined for the seventh time in the past eight months and data suggested that client demand was weak both at home and abroad, with new export business falling for the first time in three months in December.

Back home, selling pressure was visible in Banking, IT and FMCG stocks. At the same time, some amount of buying was seen in Metal, Power and Realty stocks. In scrip specific development, Shares of Eicher Motors have surged after the company announced 41% rise in total two-wheeler sales at 40,453 units in December 2015 which includes exports of 416 units. On the other hand, shares of Tata Motors have slipped after the company posted a 4% decline in sales at 39,973 units for December as against 41,734 vehicles in December 2014.

The market breadth on BSE was positive, out of 2488 stocks traded, 1347 stocks advanced, while 1043 stocks declined on the BSE. 

The BSE Sensex is currently trading at 25866.32, down by 294.58 points or 1.13% after trading in a range of 25844.58 and 26116.52. There were 5 stocks advancing against 25 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.31%, while Small cap index down by 0.07%.

The top gaining sectoral indices on the BSE were Metal up by 0.59%, Power up by 0.43% and Realty up by 0.05%, while Bankex down by 1.48%, TECK down by 1.07%, IT down by 0.85%, FMCG down by 0.85%, Oil & Gas down by 0.72% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 1.38%, Bajaj Auto up by 0.61%, NTPC up by 0.42%, Asian Paints up by 0.35% and Coal India up by 0.22%. On the flip side, Bharti Airtel down by 2.60%, Lupin down by 1.92%, ICICI Bank down by 1.90%, Tata Motors down by 1.89% and ITC down by 1.71% were the top losers.

Meanwhile, Retrospective tax law which was brought by the previous United Progressive Alliance (UPA) government, Finance Minister Arun Jaitley has said that the retrospective tax law had hurt the country as it scared away the investors. Besides, he also stressed on the need for maintaining the standards of fairness in taxation.

Retrospective taxation led to a sharp reaction from investors, resulting in muted foreign investment inflows. Jaitley said investors wanted stability and predictability and “it is important that standards of fairness in taxation be maintained.” Jaitley further said that the taxes which are realisable have to be collected, but the taxes that are not realisable, should not be collected adding that the law at times might imply that taxes are not payable and that might result in loss of revenue.

In order to get the tax deals with retrospective effect, Former finance minister Pranab Mukherjee had amended the Income Tax Act in 2012.The retrospective taxation evoked sharp reaction from both domestic as well as global investors. This law was used to raise a total tax demand of Rs 20,000 crore on UK's Vodafone for its 2007 purchase of Hutchison Whampoa Indian assets. The same law was used by Income-Tax Department in January 2014 in order to raise a tax demand of Rs 10,247 crore on Edinburgh-based Cairn Energy plc.

The CNX Nifty is currently trading at 7874.00, down by 89.20 points or 1.12% after trading in a range of 7864.65 and 7937.55. There were 10 stocks advancing against 40 stocks declining on the index.

The top gainers on Nifty were Cairn India up by 3.10%, Tata Steel up by 1.40%, Power Grid up by 1.17%, Vedanta up by 1.09% and Bajaj Auto up by 0.75%. On the flip side, Idea Cellular down by 3.56%, Bharti Airtel down by 2.58%, Kotak Mahindra Bank down by 2.24%, ICICI Bank down by 2.03% and Tech Mahindra down by 2.03% were the top losers.

Asian markets were trading in red, Hang Seng was down by 2.47%, Nikkei 225 down by 2.98%, Taiwan Weighted down by 2.5%, Shanghai Composite down by 4.14%, KOSPI Index down by 1.68%, FTSE Bursa Malaysia KLCI down by 1.21% and Jakarta Composite was down by 0.03%.