Benchmarks hold gains; Nifty trades above 8550 mark

Indian equity markets dwelled in a positive territory amid sustained buying in several blue chip counters, following firm global cues. Sentiments remained up-beat with the report that the GST implementation will be positive for the country’s economic growth without any significant impact on inflation. Further, the US India Business Council (USIBC) has 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.

Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 578.17 crore on August 03, 2016. Strong buying was observed in Auto stocks as GST will have a significant positive impact on the automotive sector. Today all passenger vehicles’ are taxed in four slabs of excise duty -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 - 18 percent /20 percent and 40 percent. On the other hand, IT stocks came under mild 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.  Meanwhile, Telecom companies showed mixed response to telecom minister Manoj Sinha announcement that government has imposed a penalty of Rs 2,313 crore on telecom operators for violating subscriber verification norms till May 31, 2016.

On the global front, Asian markets were trading mostly higher on Thursday ahead of the Bank of England's upcoming announcement of its monetary policy decision. 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.

Back home, stocks from Auto, Realty and Metal counters were supporting the markets’ uptrend, while those from Consumer Durables, Teck and Banking counters were adding to the underlying cautious undertone. In scrip specific development, Bata India has declined after the company reported a fall of 44.01% in its net profit at Rs 50.50 crore for the quarter ended June 30, 2016 as compared to Rs 90.19 crore for the same quarter in the previous year. On the flip sides, Natco Pharma has rallied after the company received final approval from the US drug regulator for generic versions of Tamiflu oral capsules.

The market breadth remained optimistic as there were 1418 shares on the gaining side against 892 shares on the losing side, while 121 shares remained unchanged.

The BSE Sensex is currently trading at 27758.88, up by 61.37 points or 0.22% after trading in a range of 27633.11 and 27921.91. There were 20 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.46%, while Small cap index up by 0.57%.

The top gaining sectoral indices on the BSE were Auto up by 1.54%, Realty up by 1.34%, Metal up by 0.98%, Power up by 0.75% and Capital Goods up by 0.38%, while Consumer Durables down by 1.52%, TECK down by 0.20%, Bankex down by 0.14%, IT down by 0.11% and FMCG down by 0.01% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 3.70%, Tata Steel up by 2.49%, Bajaj Auto up by 1.90%, Hero MotoCorp up by 1.80% and Adani Ports &Special up by 1.57%. On the flip side, ICICI Bank down by 1.12%, Lupin down by 0.74%, Asian Paints down by 0.65%, Infosys down by 0.52% and ITC down by 0.49% were the top losers.

Meanwhile, in the wake of slump in the global crude oil prices, the Petroleum Minister Dharmendra Pradhan has asked the Ministry of Finance Arun Jaitley to consider a reduction in the cess levied on hydrocarbon exploration and production companies for producing crude oil. Pradhan urged the Finance Ministry to revise the rate to 10-12 percent from current 20 percent on domestically produced crude oil, to provide relief to producers hit by slump in prices.

Petroleum Minister further said that the Government had changed the method of cess calculation to an ad-valorem basis in the Budget. However, it should be in accordance with the dynamics of the market. Therefore, I have recommended to Ministry of Finance to look into expectations of E&P sector.

Pradhan said since Oil Industry Development (OID) cess is a production levy and is not passed through to the buyers, any upward revision results in higher tax incidence to the upstream companies. In addition to cess, other statutory levies like royalty (10-20 percent), VAT (5 percent) and Octroi (4.5 percent) are also payable on production/sale of crude oil.

In the Budget for 2016-17, Finance Minister Arun Jaitley had moved from a fixed Rs 4,500 per ton cess on domestically produced crude oil to a percentage of oil prices or ad valorem rate of 20 per cent, a move that was supposed to give relief to upstream firms. Oil producers including state-owned ONGC and private sector Cairn India pleaded for reduction in cess, as at crude oil price of $ 45 per barrel, the old rate of Rs 4,500 per ton and the new ad valorem rate even out and if oil prices are to go up, companies will end up paying more.

The CNX Nifty is currently trading at 8556.45, up by 11.60 points or 0.14% after trading in a range of 8519.50 and 8601.40. There were 29 stocks advancing against 21 stocks declining on the index, while one stock remained unchanged.

The top gainers on Nifty were Tata Motors up by 3.96%, Tata Motors - DVR up by 2.84%, Tata Steel up by 2.37%, Bajaj Auto up by 2.03% and Hero MotoCorp up by 1.95%. On the flip side, BPCL down by 1.28%, ICICI Bank down by 1.14%, Yes Bank down by 1.07%, Zee Entertainment down by 0.93% and Idea Cellular down by 0.86% were the top losers.

Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI rose 0.21%, KOSPI Index gained 0.28%, Taiwan Weighted increased 0.26%, Jakarta Composite surged 0.43%, Nikkei 225 jumped 0.78% and Hang Seng was up by 0.63%. On the other hand, Shanghai Composite was down by 0.07%.