Indian benchmarks made some late hour recovery, end with modest gains

Indian equity markets showcased a lackadaisical performance on the first day of a new F&O series, as sentiments were marred by the looming pessimism about geo-political tension arising between India and Pakistan after the Indian Army conducted surgical strikes across LoC in Pakistan on Wednesday night.  The last trading day of September was characterized by high amount of volatility and the indices failed to protect their important psychological 8,600 and 27,900 levels. Though the key indices ended on positive note, they oscillated in an extremely tight range through the session, as market participants remained on the sidelines lacking conviction amid the persistent worries over global markets. Investors’ morale was dampened  with report 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. However, good buying was observed in final hours of trade on speculation that slowing inflation will allow new Reserve Bank of India (RBI) governor Urjit Patel to cut interest rates at next week’s monetary policy review.  Some support also came with the report that Employees’ Provident Fund Organisation (EPFO) has decided to invest 10% of its annual incremental deposits or an estimated Rs 13,000 crore in the current fiscal in equity exchange traded funds (ETFs). Also, GST Council chaired by Union Finance Minister Arun Jaitley was meeting and will finalise 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. It will also deliberate on a formula for payment of compensation to states for revenue loss in the aftermath of implementation of the GST. Meanwhile, Liquor stocks rallied after the Patna HC struck down the Bihar Prohibition of Liquor Act, calling it illegal. The ruling comes only five months after the Nitish Kumar government decided to impose a total ban on alcohol in towns and cities. Further, rate sensitive sectors like Banking, Realty and Auto also observed good buying on the expectations of rate cut in upcoming monetary policy meeting.

On the global front, Asian markets were broadly down on Friday as investor sentiment was dented by overnight losses on Wall Street and as oil prices inched back from near-one month highs on skepticism over OPEC’s new plan to curb output. Also weighing on the Nikkei, data showing Japan’s August consumer prices fell 0.5% compared with a year ago, down for the sixth straight month, defeating the Bank of Japan’s attempt to push up inflation and growth. The August core consumer price index, which excludes fresh food prices but includes energy, also fell 0.5% from a year earlier, the same pace as in July. Further, stocks of Chinese manufacturers declined despite slightly improved indications of the sector’s prospects.  Meanwhile, European markets traded with large cuts of around a percent in the session on renewed worries about the health of Deutsche Bank following reports that some hedge funds were moving their businesses out of Germany's biggest bank.

Back home, the benchmark got off to a somber opening, extending the downtrend for the second straight session as pessimistic sentiments prevailed across Asian markets. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads.  The indices moved only sideways, but touched intraday lows in the noon session. However, the frontline gauges managed to pare the losses and rise above the neutral line in the dying hours of trade and settled with modest gains. Finally the NSE’s 50-share broadly followed index Nifty, got buttressed by around quarter percent to settle over the crucial 8,600 support level, while Bombay Stock Exchange’s sensitive Index-Sensex accumulated over sixty points and closed above the psychological 27,850 mark. Moreover, broader markets managed a touch better than the larger peers as the BSE’s midcap and smallcap indices settled with gains of 1.95% and 2.13% respectively.

The market breadth remained in the favour of advances, as there were 2058 shares on the gaining side against 631 shares on the losing side while 187 shares remain unchanged.

Finally, the BSE Sensex gained 38.43 points or 0.14% to 27865.96, while the CNX Nifty ended up by 19.90 points or 0.23% to 8,611.15. 

The BSE Sensex touched a high and a low 27955.21 and 27716.78, respectively. There were 15 stocks advancing against 15 stocks declining on the index. The broader indices ended in green; the BSE Mid cap index rose 1.95%, while Small cap index was up by 2.13%.

The top gaining sectoral indices on the BSE were Realty up by 3.16%, Oil & Gas up by 1.70%, Auto up by 1.34%, PSU up by 1.29% and Metal up by 1.18%, while FMCG down by 0.14% was the sole losing index on BSE.

The top gainers on the Sensex were GAIL India up by 3.06%, Mahindra & Mahindra up by 3.06%, ONGC up by 2.19%, Tata Steel up by 1.78% and Tata Motors up by 1.62%. On the flip side, Cipla down by 3.44%, ITC down by 1.63%, Coal India down by 1.45%, Hindustan Unilever down by 1.12% and Dr. Reddys Lab down by 0.90% 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 traded in a range of 8,637.15 and 8,555.20. There were 28 stocks advancing against 23 decliners on the index.

The top gainers on Nifty were Aurobindo Pharma up by 3.85%, Bank of Baroda up by 3.58%, Grasim Industries up by 3.11%, Mahindra & Mahindra up by 2.90% and Gail up by 2.90%. On the flip side, Cipla down by 3.84%, Tech Mahindra down by 1.52%, Coal India down by 1.42%, ITC down by 1.38% and Ambuja Cements down by 1.10% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 61.39 points or 0.89% to 6,858.03, Germany’s DAX decreased 106.63 points or 1.02% to 10,298.91 and France’s CAC decreased 57.93 points or 1.3% to 4,385.91.

Asian equity markets ended mostly lower on Friday on growing worries about the European banking system that hit financial shares and as oil prices inched back from near-one month highs on scepticism over OPEC's new plan to curb output. Japanese shares tumbled, tracking negative overnight cues from Wall Street as investors fretted over regional lenders' exposure to Deutsche Bank. On Thursday, Deutsche Bank shares slumped to a record low after a report that trading clients had withdrawn excess cash and positions held in the largest German lender. But the Japanese yen, on the other hand, are set to be the weakest one on BoJ expectations. Meanwhile, Chinese shares ended higher after a private gauge of Chinese factory activity pointed to a modest expansion in September, adding to recent signs of stability.