Benchmarks trade near low point of day

Indian equity benchmarks continued their sluggish trade hovering near the lowest point of the day in the late morning session. The sentiments were under pressure on account of selling in front line blue chip counters along with Tata group companies which came under pressure for the third day in a row after the surprise removal of Cyrus Mistry as head of the conglomerate which continued to impact the sentiment. The ousted group chairman Cyrus Mistry sent a letter to Tata Sons directors, suggesting that the group was facing a challenging environment across companies under his tenure. Mistry said he had been reduced to a lame duck chairman. Domestic equity indices are likely to trade on a flat to negative note, tracking mixed closing for US stocks in overnight trade and ahead of the earnings of many blue chip companies. Investors will be eyeing the quarterly results whereby in all a total of 135 companies would announce their September quarter earnings scheduled for the day. The list includes Maruti Suzuki, ONGC, Tech Mahindra, ABB, MRF, PVR, TVS Motor, Emami and Bharat Electronics. Through the week, a total of 475 BSE-listed companies will announce their September quarter numbers. Sentiments also remained dampened with report that foreign institutional investors were net sellers in equities worth Rs 1,451 crore on Wednesday, as per provisional stock exchange data. The Indian rupee weakened against the US dollar, tracking the losses in the local equity and Asian currencies markets. The dollar’s renewed strength against other currencies overseas came after a preliminary survey showed key US services expanded in October, which reinforced expectations that the Federal Reserve will lift rates before the end of the year. This mainly pushed down the rupee. Separately, a private report highlighted that the Reserve Bank of India may be going all-out to bring down inflation to 4%, but it probably cannot do so sustainably as health and education prices will keep the consumer price index (CPI) above the targeted level. The report underlined that three government decisions over the next few weeks -- the GST rate, Seventh Pay Commission housing allowance and the fiscal trajectory -- progress on food reforms and the pace of recovery will determine if the direction is comforting.

Traders were seen piling position in FMCG stocks, while selling was witnessed in Bankex, Capital Goods and Auto sector stocks. In scrip specific development, Noida Toll Bridge, a toll operator for Delhi-Noida road better known as DND Flyway, is locked at lower circuit limit following an order by the Allahabad High Court to make the flyway toll free. The court pronounced its judgment on Wednesday in response to a public interest litigation filed in 2012 by Federation of Noida Resident Welfare Association. The market may remain volatile today as traders may roll over positions in the Futures & Options (F&O) segment from the near month i.e. October 2016 series to next month i.e. November 2016 series. The near month October 2016 derivatives contracts will expire today i.e. October 27, 2016.

On the global front, Asian markets were trading mostly in red, data showed profit growth in China’s industrial firms slowed last month from the previous month’s rapid pace as several sectors showed weak activity, suggesting the world’s second-biggest economy remains underpowered. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 8,600 and 27,800 levels respectively. The market breadth on BSE was negative in the ratio of 909:1295, while 162 scrips remained unchanged.

The BSE Sensex is currently trading at 27705.85, down by 130.66 points or 0.47% after trading in a range of 27700.87 and 27843.62. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.90%, while Small cap index was down by 0.48%.

The top gaining sectoral indices on the BSE was FMCG up by 0.20%, while Bankex down by 1.15%, Capital Goods down by 1.09%, Auto down by 1.06%, TECK down by 1.03% and IT down by 0.92% were the losing indices on BSE.
The top gainers on the Sensex were ITC up by 1.51%, Dr. Reddy’s Lab up by 1.27%, HDFC up by 0.94%, ONGC up by 0.60% and Sun Pharma up by 0.60%.

On the flip side, Asian Paints down by 2.69%, Tata Motors down by 2.20%, Hindustan Unilever down by 1.64%, SBI down by 1.56% and Larsen & Toubro down by 1.48% were the top losers.

Meanwhile, defending the proposal to levy cess on tobacco and luxury goods, Finance Minister Arun Jaitley has said that it is an option preferable over additional tax to compensate states under GST regime; otherwise the cost of funding through this route would be exorbitantly high and almost unbearable.

Jaitley further said that if the central government has to borrow money to fund states' compensation, it would add to its liability and increase cost of borrowing for the Centre, state governments as well as the private sector. He added that if cess is levied, states which benefit out of GST roll out, do not have to compensate the losing states.  On the crucial issue of the tax rate structure, which three earlier meetings of the GST Council failed to decide, Jaitley has said that a four-slab structure of 6, 12, 18 and 26 per cent is under consideration, with lower rates for essential commodities and higher ones for luxury goods, to ensure that the tax structure does not become regressive or burdensome to the common man.

He further said that different items used by different segments of society have to be taxed differently; otherwise the GST would be regressive and total tax eventually collected has to be revenue neutral. The Government should not lose money necessary for expenditure nor make a windfall gain.

Jaitley also said that cesses can be imposed which would be subsumed in the taxes after five years. He added that this would include clean energy cess and cesses on luxury items and tobacco products, which in any case, presently also pay levy higher than 26 per cent. This would ensure no additional burden on the tax payer and yet be able to compensate the losing states. He stated that the GST seeks to subsume most of indirect taxes and turn India into one market with uniform tax structure across the country.

The CNX Nifty is currently trading at 8563.60, down by 51.65 points or 0.60% after trading in a range of 8561.00 and 8609.90. There were 9 stocks advancing against 42 stocks declining on the index.

The top gainers on Nifty were ITC up by 1.70%, Dr. Reddy’s Lab up by 1.38%, HDFC up by 1.00%, Sun Pharma up by 0.84% and ONGC up by 0.55%.

On the flip side, Bharti Infratel down by 3.48%, Yes Bank down by 3.12%, Asian Paints down by 2.76%, Tata Motors - DVR down by 2.35% and Tata Motors down by 2.32% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 267.41 points or 1.15% to 23,058.02, Nikkei 225 decreased 112.59 points or 0.65% to 17,279.25, Taiwan Weighted decreased 46.51 points or 0.5% to 9,315.74, Shanghai Composite decreased 11.97 points or 0.38% to 3,104.35 and FTSE Bursa Malaysia KLCI decreased 6.04 points or 0.36% to 1,667.88.

On the other hand, KOSPI Index increased 10.73 points or 0.53% to 2,024.62 and Jakarta Composite increased 19.9 points or 0.37% to 5,419.58.