Benchmarks continue weak trade in afternoon session

Indian equity markets continued their weak trade in the afternoon session on a broad based selling amid weak global cues as oil prices dipped and after Chicago Fed President Charles Evans said that the Fed could raise short-term interest rates by three quarter-point by the end of 2017. Further, losses in the Consumer Durables, Oil & Gas, IT, Realty and Auto stocks dampened the mood. Depreciation in Indian rupee too weighed down sentiments, the rupee was trading lower by 4 paise at 66.88 against the dollar at this point of time on sustained foreign fund outflows amid increased demand for the US currency from importers. Traders were unable to get any respite with NITI Aayog Vice-Chairman Arvind Panagariya’s statement where he defended the Centre’s proposal for four-tier rate structure and a cess under the Goods and Services Tax stating that said would ensure less inflationary implications and lower tax rates for consumers as well as revenue predictability for the exchequer. In the scrip specific development, Idea Cellular was down over 2 percent after its Q2 net profit plunged 88 percent on account of fierce competition and higher costs.

On the global front, Asian markets were trading mostly in red following the release of data pointing to a South Korean slowdown. South Korea’s gross domestic product grew 2.7% year-on-year in the third quarter, down from a 3.3% gain in the prior three-month period.

The BSE Sensex is currently trading at 28088.63, down by 90.45 points or 0.32% after trading in a range of 28013.69 and 28211.41. There were 12 stocks advancing against 18 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.27%, while Small cap index was up by 0.05%.

The top gaining sectoral indices on the BSE were Bankex up by 0.01%, while Consumer Durables down by 0.78%, Oil & Gas down by 0.62%, IT down by 0.48%, Realty down by 0.40% and Auto down by 0.37% were the losing indices on BSE.

The top gainers on the Sensex were Dr. Reddys Lab up by 1.45%, Power Grid Corpn. up by 0.88%, ICICI Bank up by 0.84%, Maruti Suzuki up by 0.82% and Axis Bank up by 0.75%. On the flip side, Tata Steel down by 2.22%, GAIL India down by 1.95%, Hindustan Unilever down by 1.42%, Mahindra & Mahindra down by 1.41% and TCS down by 1.15% were the top losers.

Meanwhile, Niti Aayog Vice-chairman, Arvind Panagariya has came in support of the Centre’s proposal for 4-rate structure and cess under the Goods and Services Tax (GST), stating that this structure would help in dealing with any possible surge in inflation and lower tax rates for consumers as well as revenue predictability for the exchequer. Panagariya said that “the big gain from GST is having a single tax rate on a product across the country. No tax theory says that one rate is better than two rates.”

Earlier, the Finance Ministry had proposed that GST should have a four-rate structure with two standard rates of 12 per cent and 18 per cent. Food items and other necessities would be taxed at six per cent, while white goods and luxury products would be taxed at 26 per cent, along with an additional cess for luxury and demerit goods. However, a number of states opposed the Union Finance Ministry’s proposal to levy a cess on ultra luxury goods, tobacco and pan masala and for clean energy and instead favoured a higher tax rate on consumer durables.

Panagariya also favoured continuation of cess, dismissing criticism that it would dilute the original idea of a single unified rate. He added that the big gain from GST is having a single tax rate on a product across the country and advantage of levying such a cess is that it would be temporary. “After five years, it can be dropped. In case of a higher tax rate, there may be no inclination amongst States to remove it.”

He also said that a lot of people think that they have identified single tax rate across commodities. But the bigger part is single tax rate on every product across entire country. There is no tax theorem that two rates are better than four. He further said that 'If you do a single rate (16 or 18 per cent) then some of rates you will have to bring very far off. Obviously, then there will be inflation on those particular commodities (with lower rates of tax). There are products, which have 3 per cent rate of tax. If you take those all the way to 16 or 18 per cent then there will be inflation implications.' He also expressed hope that the government will meet the roll-out target of April 1, 2017 for GST but conceded that it may be a “little bit of a race”.

The CNX Nifty is currently trading at 8695.00, down by 13.95 points or 0.16% after trading in a range of 8663.45 and 8722.65. There were 22 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 3.23%, Dr. Reddys Lab up by 1.31%, Tech Mahindra up by 1.29%, ICICI Bank up by 1.12% and Ultratech Cement up by 1.09%. On the flip side, Tata Steel down by 2.08%, Idea Cellular down by 2.08%, GAIL India down by 2.05%, Hindustan Unilever down by 1.43% and Mahindra & Mahindra down by 1.41% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 27.7 points or 0.12% to 23,576.38, KOSPI Index decreased 10.57 points or 0.52% to 2,037.17, Jakarta Composite decreased 6.49 points or 0.12% to 5,414.51, FTSE Bursa Malaysia KLCI decreased 1.96 points or 0.12% to 1,675.80 and Shanghai Composite decreased 1.13 points or 0.04% to 3,127.11.

On the flip side, Taiwan Weighted increased 63.15 points or 0.68% to 9,385.65 and Nikkei 225 was up by 130.83 points or 0.76% to 17,365.25.