Fatigued markets settle with paltry gain

The Indian markets were unable to make any significant recovery after plunging in last session and witnessed a cautious day of trade, finally closing in green with marginal gains. The key indices oscillated in an extremely tight range through the session as market participants remained on the sidelines lacking conviction ahead of the Bank of England's (BOE) monetary policy meeting later in the day. In early trade sentiments remained up-beat with Finance Ministry stating that all efforts are being made to roll out GST from April 1, 2017, and allayed fears that it will have an impact on inflation even if the rate is kept at 20 per cent. Also, the US India Business Council (USIBC) termed the passage of GST bill by the Indian Parliament as a game-changer, saying it is a significant milestone in efforts to improve the country's ranking in World Bank's ease of doing business index. USIBC believes that the GST will boost economic growth by streamlining domestic supply chains and removing the compliance burden of contradictory state tax regimes.

Meanwhile, Auto counters gained traction as GST will have a significantly positive impact on the automotive sector. Today all passenger vehicles’ are taxed in four slabs of excise duty of 12 percent, 24 percent, 27 percent and 30 percent depending on the length of vehicle, engine displacement and ground clearance. Apart from excise duty, there is value added tax (VAT) ranging from 12.5 percent to 14.5 percent and central sales tax (CST) of 2 percent (for vehicles sold outside the manufacturing state). Post GST, all these taxes are going to be subsumed into a single tax and all passenger vehicles are likely to fall in only two slabs of 18 percent /20 percent and 40 percent. Some buying was also observed in Oil exploration counters after Petroleum Minister Dharmendra Pradhan asked Finance Ministry to cut cess on domestically produced crude oil to 10-12 percent from current 20 percent to provide relief to producers hit by slump in prices. On the other hand, IT counters came under selling pressure as industry body Nasscom enlightened that margins of Indian IT companies are under pressure due to reasons like global economic turbulence, while there may be a marginal decline in hiring because of increased automation and efficiency. Further, Telecom companies showed mixed response to telecom minister Manoj Sinha’s announcement that government has imposed a penalty of Rs 2313 crore on telecom operators for violating subscriber verification norms till May 31, 2016.

On the global front, Asian markets ended mostly in green on Thursday as oil prices rebounded from four-month lows and US private-sector hiring data showed the labor market was holding up despite slowing in small business hiring. Mining shares and energy producers drove the regional indices up from its lowest level since June 24, the day when referendum results showed Britain had decided to leave the European Union. Meanwhile, European stocks edged higher in early trade as investors digest earnings reports and await the Bank of England's rate decision where it is expected to cut interest rates to a record low.

Back home, the local benchmarks got off to a positive start in the morning trade as investors were largely influenced by the supportive leads from Asian markets. The indices moved only sideways thereafter but drifted into the negative territory in the afternoon session. However, the frontline gauges managed to pare the losses and rise above the neutral line in the dying hours of trade. Finally the NSE’s 50-share broadly followed index Nifty, settled with single digit gains tad above the crucial 8,550 support level, while Bombay Stock Exchange’s Sensitive Index Sensex added sixteen points and closed above the psychological 27,700 mark. Moreover, the broader markets managed a touch better than the larger peers as the BSE’s midcap and smallcap indices settled with gains of 0.38% and 0.39% respectively.

The market breadth remained optimistic, as there were 1430 shares on the gaining side against 1264 shares on the losing side, while 171 shares remained unchanged.

Finally, the BSE Sensex surged by 16.86 points or 0.06% to 27714.37, while the CNX Nifty rose by 6.25 points or 0.07% to 8,551.10.

The BSE Sensex touched a high and a low 27921.91 and 27627.97, respectively. The broader indices made a positive closing; the BSE Mid cap index ended up by 0.38%, while Small cap index was up by 0.39%.

The top gaining sectoral indices on the BSE were Realty up by 2.25%, Metal up by 1.53%, Auto up by 1.35%, Power up by 0.71% and PSU up by 0.32%, while Consumer Durables down by 0.82%, IT down by 0.53%, TECK down by 0.31%, Bankex down by 0.17% and FMCG down by 0.12% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 4.60%, Tata Motors up by 4.41%, Bharti Airtel up by 2.18%, Adani Ports &Special up by 2.06% and Hero MotoCorp up by 1.79%. On the flip side, Asian Paints down by 1.78%, Lupin down by 1.32%, Infosys down by 1.18%, Coal India down by 0.75% and Mahindra & Mahindra down by 0.74% were the top losers.

Meanwhile, the International credit rating agency Standard & Poor (S&P) in its latest report has stated that India needs supportive monetary and fiscal policies to achieve 8 percent growth in the next 3 fiscal years, economic reforms need to gain momentum. But the ability to deploy monetary and fiscal stimulus is limited by the absence of fiscal cushion and inflation dynamics.

S&P Global Ratings also projected India's economy to accelerate to approximately 8 percent in the next three fiscal years even as China slips to annual growth rates of below 7 per cent.  It further said in statement, India has edged out China as the world's fastest-growing large economy, despite a slowdown in global growth and tough times for many emerging markets. However, this outperformance could prove temporary if India's reforms do not gather greater momentum.

It added that, India will have to address issues plaguing private investment and banks will have to clean up their balance sheets. Companies in infrastructure and other asset-heavy sectors will also need to deleverage materially. Besides, the recent trend of strong economic growth in India could slow in the medium term if improvements in the country's infrastructure do not pick up. A heavy debt burden and relatively large fiscal deficits prevent heavier budgetary spending to ease this constraint. Past attempts at allowing the private sector a role in infrastructure have met with limited success due to legal and bureaucratic obstacles.

The CNX Nifty traded in a range of 8,601.40 and 8,518.15. There were 31 stocks advancing against 20 decliners on the index.

The top gainers on Nifty were Bank of Baroda up by 5.54%, Tata Steel up by 4.54%, Tata Motors up by 4.53%, Tata Motors - DVR up by 2.58% and Adani Ports &Special up by 2.47%. On the flip side, Asian Paints down by 1.35%, Infosys down by 1.24%, Zee Entertainment down by 1.17%, Lupin down by 1.12% and Indusind Bank down by 0.73% were the top losers.

The European markets were trading in green; UK’s FTSE 100 rose by 8.07 points or 0.12% to 6,642.47, France’s CAC jumped 16.56 points or 0.38% to 4,337.64 and Germany’s DAX was up by 81.3 points or 0.8% to 10,251.51.

Asian equity markets ended higher on Thursday as oil prices rebounded from four-month lows and US private-sector hiring data showed the labor market was holding up despite slowing in small business hiring. Traders eyed a Bank of England meeting later in the day amid expectations the central bank will cut interest rates for the first time since 2009 in a bid to ward off a recession. Chinese shares closed marginally higher after the People's Bank of China reiterated it would continue its prudent monetary policy in the second half of the year and fine-tune it as necessary. Further, Japanese shares ended a volatile session sharply higher as the yen failed to maintain earlier gains on comments by Bank of Japan Deputy Governor Kikuo Iwata that the central bank hasn't set a future direction for policy.