Benchmarks continue weak trade; Consumer Durables, Tech drag

Indian equity benchmarks continued their weak trade in the afternoon session, on account of selling in frontline blue chip counters taking cues from weak global counterparts. Sentiments remained down-beat with India’s Wholesale Price Index (WPI) inflation for month of July climbing to a two-year high at 3.55 percent as compared to 1.62 percent in the previous month. Meanwhile, traders were seen piling position in Oil & Gas, Capital Goods, Metal, Power and PSU stocks on the other hand selling was witnessed in Consumer Durables, tech, Realty, IT and Auto sector stocks. In scrip specific development, state-run oil marketing firm IOC and BPCL rose despite slashing the price of petrol by Rs 1 per liter and diesel by Rs 2 per liter.

On the global front, Asian markets were trading mostly in red as fresh record closing highs in the US overnight failed to boost sentiment. Back home, the BSE Sensex is currently trading at 27970.72, down by 181.68 points or 0.65% after trading in a range of 27942.65 and 28199.10. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was up by 0.08%, while Small cap index was down by 0.25%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 0.48%, Capital Goods up by 0.42%, Metal up by 0.34%, Power up by 0.31% and PSU up by 0.30%, while Consumer Durables down by 1.53%, TECK down by 1.36%, Realty down by 1.27%, IT down by 1.21% and Auto down by 0.89% were the losing indices on BSE.

The top gainers on the Sensex were Adani Ports & SEZ up by 4.47%, Cipla up by 3.15%, Power Grid Corpn. up by 1.60%, NTPC up by 0.84% and Larsen & Toubro up by 0.71%. On the flip side, Tata Motors down by 2.18%, HDFC down by 1.69%, Sun Pharma Inds. down by 1.55%, Infosys down by 1.47% and Bharti Airtel down by 1.42% were the top losers.

Meanwhile, domestic rating agency ICRA in its latest report has stated that the impact of the GST will be negative on the oil and gas industry due to the compliance with dual taxation regimes and non-creditable tax costs. It added that not just that, the new taxation regime will impose an additional burden on the industry due to compliance to a dual tax regime but profitability of the industry could also be modestly hit because of tax-related under recoveries.

As per the report, GST law in its present form excludes a major portion of the oil and gas industry products as well as tobacco and liquor.  Five petroleum products - crude oil, natural gas, motor spirit, high speed diesel and aviation turbine fuel are excluded from GST at present but would be included at a later date, while other products such as Liquefied Petroleum Gas (LPG), naphtha, kerosene and fuel oil are included. Therefore, the industry would have to comply with both the current tax regime as well as the GST regime.

ICRA further said that it would result in non-creditable tax costs wherein a refiner will pay GST on the procurement of plant, machinery and services for production of Motor Spirit (MS), ATF and Diesel. However, the input GST would not be creditable against the excise duty and value added tax levied on these fuels.  Crude Oil, MS, ATF, HSD and natural gas constitute a significant share of the production of the upstream and downstream industry; keeping these out of the ambit of GST would bar the oil and gas industry from most of the benefits of GST.

The report said that because of non-creditable tax costs, profits of refining and marketing companies could be modestly hit, as the pricing of petroleum products are governed by specific formula (Import parity and trade parity), unless the government allows them to pass on the tax related under recoveries to consumers and also highlighted that there were several other issues where there was lack of clarity, such as whether offshore supplies to the upstream sector to be subject to central, state or integrated GST; whether natural gas includes compressed natural gas, liquefied natural gas, piped natural gas; whether GST subsumes NCCD and cess levied on crude oil, whether losses during storage constitute self consumption or supply etc. Also, excluding crude oil and natural gas from GST has an inflationary impact on the prices of other downstream products produced from these feed stocks such as naphtha, kerosene, petrochemicals etc

The CNX Nifty is currently trading at 8617.30, down by 54.85 points or 0.63% after trading in a range of 8600.45 and 8682.35. There were 17 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were Adani Ports & SEZ up by 4.22%, Cipla up by 3.47%,  Hindalco up by 2.87% , BPCL up by 2.49% and Tata Power up by 2.06%. On the flip side, Bharti Infratel down by 5.70%, Tata Motors down by 2.34%, Tech Mahindra down by 2.28%, Aurobindo Pharma down by 2.24% and Bosch down by 2.11% were the top losers.

The Asian markets were trading mostly in red, Nikkei 225 decreased 273.05 points or 1.62% to 16,596.51, Taiwan Weighted decreased 38.15 points or 0.42% to 9,110.36, Shanghai Composite decreased 8.49 points or 0.27% to 3,116.71 and KOSPI Index decreased 2.71 points or 0.13% to 2,047.76. On the flip side, FTSE Bursa Malaysia KLCI increased 8.44 points or 0.5% to 1,698.77, Hang Seng increased 19.14 points or 0.08% to 22,951.65 and Jakarta Composite increased 44.69 points or 0.84% to 5,365.25.