Benchmarks continue to trade in red in late morning session

Indian benchmark indices continue to trade in red in the late morning session as the investors turned cautious with the start of the June quarter earnings. Uncertainty also prevailed in the local market with main opposition Congress ahead of the Monsoon session of Parliament, stating that there is no change in its stand on the three principal demands on the Goods and Services Tax (GST) bill and it is still awaiting the government's offer on the issue. However, investors got some confidence with the cabinet approving a Rs 12,000-crore outlay for Pradhan Mantri Kaushal Vikas Yojana (PMKVY) to impart skills to 1 crore people over the next four years (2016-20). Skill training would be done based on industry-led standards aligned to the National Skill Qualification Framework. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 290.53 crore on July 13, 2016.

On the global front, Asian markets were trading mixed on Wednesday as traders turned jittery ahead of a Bank of England meeting, Friday's release of China's GDP data, and digesting news British Prime Minister Theresa May's Cabinet. The Bank of England is likely to lower its benchmark lending rate by a quarter of a percentage point to 0.25% to counter the fallout from the Brexit vote. Meanwhile, US stocks inched up to another record on Wednesday after spending much of the day fluttering between gains and losses, stretching the winning streak that began with a strong U.S. jobs report on Friday into a fourth day. However, stocks got a slight bump from the US Fed's beige book report which indicated that the US economy is holding steady although consumption may be softening.

Back home, stocks from Consumer Durables, PSU and Power counters were supporting the market, while those from Metal, Realty and IT counters were adding to the underlying cautious undertone. In scrip specific development, National Aluminium Company (NALCO) rallied after the company announced that the government has granted Pottangi Bauxite Mines, in Koraput district of Odisha, where the company's 22,75,000-tonne alumina refinery is located. Moreover, SRF has surged on reports that the government has imposed anti-dumping duty on imports from China for refrigerant Tetrafluoroethane.

The market breadth remained optimistic as there were 1258 shares on the gaining side against 906 shares on the losing side, while 107 shares remained unchanged.

The BSE Sensex is currently trading at 27800.09, down by 15.09 points or 0.05% after trading in a range of 27763.15 and 27866.11. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.15%, while Small cap index up by 0.46%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.77%, PSU up by 0.44%, Power up by 0.43%, Bankex up by 0.37% and Capital Goods up by 0.26%, while Metal down by 0.39%, Realty down by 0.11%, IT down by 0.09% and FMCG down by 0.03% were the top losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 1.68%, Power Grid Corpn. up by 1.67%, Tata Motors up by 1.30%, Maruti Suzuki up by 1.24% and Asian Paints up by 1.14%. On the flip side, ONGC down by 2.13%, Mahindra & Mahindra down by 1.67%, Sun Pharma down by 1.14%, Cipla down by 1.07% and Dr. Reddys Lab down by 0.96% were the top losers.

Meanwhile,  In order to cut the fuel subsidy burden, the government has decided to raise the price of kerosene each month for 10 months, starting with a hike by 25 paise a litre for the first time in five years on 1 July. The government has asked state-owned oil firms to revise upward kerosene price by 25 paise every month till April 2017. The proposed price hike would lower the government's subsidy burden by around Rs 1,000 crore this year.

The move will not only ensure savings on the government’s oil subsidy bill but is expected to ensure quicker payments for the downstream companies and better working capital efficiency. Kerosene accounted for 41.7 per cent of the total petroleum subsidy of Rs 27,571 crore in 2015-16. Before, the hike, PDS kerosene price of Rs 14.96 a litre was at Rs 13.12 discount to the fuel’s actual cost of production. Of the discount, the government bears Rs 12 a litre and the rest of the bill is footed by upstream oil producers like ONGC. In 2015-16, Kerosene accounted for 41.7 % of the total petroleum subsidy of Rs 27,571 crore.

Subsidy on kerosene was expected to be in the range of Rs 9,000-12,500 crore in 2016-17, assuming crude oil price of $40-50 per barrel. As per the estimates of local rating agency ICRA, the move to increase retail prices of subsidised kerosene by Rs 0.25 a litre per month for 10 months (from July 2016 to April 2017) would lead to overall reduction in gross under-recovery or subsidy by Rs 760 crore in current fiscal and Rs 2,040 crore in FY18. The upstream companies would be major beneficiaries of the reform especially at current or higher level of crude oil prices.

The CNX Nifty is currently trading at 8514.05, down by 5.45 points or 0.06% after trading in a range of 8500.70 and 8523.40. There were 26 stocks advancing against 25 stocks declining on the index.

The top gainers on Nifty were Power Grid up by 1.64%, Tata Motors - DVR up by 1.47%, Tech Mahindra up by 1.46%, GAIL India up by 1.43% and Bank of Baroda up by 1.37%. On the flip side, ONGC down by 2.01%, Mahindra & Mahindra down by 1.67%, Hindalco down by 1.25%, Sun Pharma down by 1.24% and Dr. Reddys Lab down by 1.20% were the top losers.

Asian markets were showing mixed trend, KOSPI Index was tad higher by 0.04%, Taiwan Weighted gained 0.04%, Hang Seng was up by 0.07% and Nikkei 225 increased by 0.66%. On the other hand, Jakarta Composite declined by 0.56%, Shanghai Composite was lower by 0.4% and FTSE Bursa Malaysia KLCI was down by 0.22%.