Benchmarks gyrate around neutral line in late morning session

Indian equity benchmarks continued their lackluster trade oscillating between positive and negative terrain in the late morning session a day after the Indian Army said that it had conducted surgical strikes against terrorists across the Line of Control on Wednesday night. This new element of uncertainty has crept in the market and investors will see this event as an additional risk premium on Indian markets. Sentiment remained dampened with a report from Labour Bureau stating that unemployment rate in India has shot up to a five-year high of 5 percent in 2015-16, with the figure significantly higher at 8.7 percent for women as compared to 4.0 percent for men. The downside was restricted after Indian rupee opened strong against the US dollar at Interbank Foreign Exchange market on fresh selling on the American currency by bankers and exporters. Bandaru Dattatreya-led labour ministry has decided to increase the equity investment of the Employees Provident Fund Organisation (EPFO) to 10% in 2016-17 as compared to 5% invested in the last financial year, bypassing the need for consensus by the Central Board of Trustees of the EPFO. EPFO is expected to have an incremental corpus of Rs 1.3 lakh crore and 10% of this or Rs 13,000 crore would be pumped into the equity market this financial year. Traders were seen piling up positions in Realty, Oil & Gas and Auto stocks, while selling was witnessed in Metal and FMCG sector stocks. In scrip specific development, Alkem Laboratories was trading in red after the company received 13 observations from the US drug regulator for the manufacturing facility at Daman. The street is eyeing GST Council meeting where it will finalize the rules regarding registration, refunds and payment and also take a view on exemption of goods under the upcoming Goods and Services Tax (GST) regime. To be chaired by Union Finance Minister Arun Jaitley, the Council will also deliberate on a formula for payment of compensation to states for revenue loss in the aftermath of implementation of the GST.

On the global front, Asian stocks were mostly lower, as worries about the health of Deutsche Bank weighed on financial shares and as oil prices inched back from near-one month highs on skepticism over OPEC’s new plan to curb output. Bond buyers are already testing the credibility of the Bank of Japan’s new monetary policy framework, pushing 10-year yields below its zero percent target and giving the bank few palatable options to bring them back on track. Back home, the NSE Nifty and BSE Sensex were trading above the psychological 8,600 and 27,800 levels respectively. The market breadth on BSE was positive in the ratio of 1590:551, while 118 scrips remained unchanged.

The BSE Sensex is currently trading at 27812.39, down by 15.14 points or 0.05% after trading in a range of 27716.78 and 27904.04. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.18%, while Small cap index was up by 1.31%.

The top gaining sectoral indices on the BSE were Realty up by 1.82%, Oil & Gas up by 1.28%, Auto up by 0.88%, PSU up by 0.78% and Power up by 0.57%, while Metal down by 0.18% and FMCG down by 0.10% were the losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 2.80%, SBI up by 1.58%, Mahindra & Mahindra up by 1.50%, ONGC up by 1.31% and Lupin up by 1.30%.

On the flip side, Cipla down by 3.49%, Coal India down by 2.54%, Adani Ports & Special Economic Zone down by 1.62%, Bharti Airtel down by 1.58% and Hindustan Unilever down by 1.15% were the top losers.

Meanwhile, after resolving contentious issues of threshold and dual control under the new taxation regime, the GST council chaired by Union finance minister Arun Jaitley will further meet on September 30, to finalise the rules for registration, refunds and payment as well as the categories of goods and services that would be exempt from the GST. 

The council will also hold discussion on a formula for payment of compensation to states for revenue loss in the aftermath of implementation of the GST. While 2015-16 will be the base year for calculating revenue compensation to states for any loss of receipts arising from rollout of GST, the final methodology will be worked out in next meetings.

At the last meeting of the council, four alternatives came up for discussion for compensating states for loss of revenue after implementation of the GST. A state can be compensated if the revenue under GST falls short of the average tax earnings in best three years out of past five years. Secondly, of the five years, two outliers are left out and average is taken. If the revenue under GST is short of this, then states are compensated. Thirdly, a base year can be fixed and a particular growth rate decided for all states. If the revenue falls short of that, then the state gets compensated. Another suggestion was to base compensation on a fixed rate of revenue growth.

The GST Council had recently issued draft rules for GST registration, refunds, returns and invoice, it would also meet on October 17, 18 and 19 to finalise the tax slabs for GST as well as the crucial rates at which the GST would be paid by consumers. The government aims to implement the new indirect tax regime Goods and Services Tax (GST) from April 1, 2017.

The CNX Nifty is currently trading at 8602.90, up by 11.65 points or 0.14% after trading in a range of 8555.20 and 8617.65. There were 34 stocks advancing against 17 stocks declining on the index.

The top gainers on Nifty were Bank of Baroda up by 2.90%, GAIL India up by 2.85%, Aurobindo Pharma up by 2.50%, Grasim Industries up by 2.28% and Eicher Motors up by 1.93%.

On the flip side, Cipla down by 3.87%, Coal India down by 2.69%, Bharti Airtel down by 1.74%, Bharti Infratel down by 1.67% and Adani Ports & Special Economic Zone down by 1.56% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 315.46 points or 1.33% to 23,424.01, Nikkei 225 decreased 221.45 points or 1.33% to 16,472.26, Taiwan Weighted decreased 65.3 points or 0.7% to 9,205.60, KOSPI Index decreased 19.3 points or 0.93% to 2,049.42, Jakarta Composite decreased 5.52 points or 0.1% to 5,426.44 and FTSE Bursa Malaysia KLCI decreased 4.45 points or 0.27% to 1,665.19.

On the other hand, Shanghai Composite increased 5.12 points or 0.17% to 3,003.60.