Benchmarks continue weak trade; Metal, Realty drag

Indian equity benchmarks continued their weak trade in the late morning session on concern over the Presidential election outcome amid lackluster economic data. The sentiments remained weak as participants indulged in cutting their bets, tracking a falling trend in global market as investors fret over next week’s US president election. Foreign institutional investors were net sellers in equities worth Rs 707 crore on Thursday, as per provisional stock exchange data. Investors failed to draw solace with the GST Council fixing a four-slab tax structure for GST implementation. The council finalized four-tier GST tax structure of 5, 12, 18 and 28 percent that aims to lower tax incidence on most goods and keep out essential items. Chief Economic Advisor Arvind Subramanian has said that the GST Council’s decision to peg the tax rate on items of mass consumption at 5 percent will bring down prices and soften inflation. However, the street expects that GST may not immediately give a big boost to the economy as was initially expected because of the complicated tax structure. There is expectation that growth will slow down initially before the longer term benefits kick in.  Meanwhile, in a setback for the Information Technology companies (IT), as per reports Nasscom is likely to revise the sector’s revenue growth guidance downwards. The revision will be in the range of 8-10 percent as compared to 10-12 percent projected in the beginning of this financial year. The revision in growth guidance is due to uncertain global environment and softening of Banking, Financial services and Insurance (BFSI) sector. Traders were seen piling positions in FMCG and IT stocks, while selling was witnessed in Metal, Realty and Consumer Durables sector stocks. In scrip specific development, stocks of cigarette manufacturing companies ITC, Godfrey Phillips India, VST Industries and Golden Tobacco were trading firm after the Goods and Services Tax (GST) Council finalized the tax slab. The market feared these products will be taxed around 40 percent in the GST regime.

On the global front, Asian shares were trading mostly in red, marked by growing uncertainty about the outcome of the US presidential election. Chinese Finance Minister Lou Jiwei stated that the country is actively pushing forward reforms on property taxes as it overhauls its fiscal system. Any progress on expanding the tax would be a major development in China’s red-hot housing market. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 8,500 and 27,400 levels respectively. The market breadth on BSE was negative in the ratio of 515:1904, while 87 scrips remained unchanged.

The BSE Sensex is currently trading at 27357.16, down by 73.12 points or 0.27% after trading in a range of 27338.48 and 27498.91. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.52%, while Small cap index was down by 2.01%.

The top gaining sectoral indices on the BSE were FMCG up by 2.09% and IT up by 0.10% while, Metal down by 2.46%, Realty down by 1.62%, Consumer Durables down by 1.38%, PSU down by 1.28% and Capital Goods down by 1.28% were the losing indices on BSE.

The top gainers on the Sensex were ITC up by 4.54%, Hindustan Unilever up by 2.36%, NTPC up by 1.05%, ONGC up by 0.95% and Axis Bank up by 0.76%.

On the flip side, Sun Pharma down by 6.13%, Dr. Reddys Lab down by 5.37%, Lupin down by 4.26%, Maruti Suzuki down by 1.73% and Coal India down by 1.73% were the top losers.

Meanwhile, the powerful Goods and Services Tax (GST) Council, headed by Union Finance Minister Arun Jaitley, has finalized a four-tier tax structure of 5, 12, 18 and 28 percent that aims to lower tax incidence on most goods and keep out essential items. According to Arun Jaitley, the two items that were discussed by the GST Council were rate structure & compensation formula and cross empowerment.

Finance Minister said that under the new rate structure, the aam aadmi items will be taxed at a rate of 5 percent and half of the items that come under the consumer price index basket like food-grains, would not be taxed at all. Further he said that 5 percent duty will be for items of mass consumption, standard rates of 12 percent and 18 percent will be applicable on other items. He also said that the GST cess will not put additional burden on consumers. The highest tax slab of 28 percent will be applicable to items which are currently taxed at 30-31percent (excise duty + VAT). Luxury cars, tobacco and aerated drinks would also be levied with an additional cess on top of the highest tax rate.

Jaitley also added that all GST decisions were taken by consensus except for the 28 percent slab. GST rates for gold will be decided after seeing revenue implications. Further he will seek parliamentary approval for bills later this month that would set the rate and scope of the GST. State assemblies must also to approve similar bills for the tax to enter force as planned next April 1. Commenting on the rate structure, Chief Economic Adviser Arvind Subramanian has said that it has been designed in a way that will protect people at the lower-end and GST rate structure will be more than revenue neutral.

The CNX Nifty is currently trading at 8453.25, down by 31.70 points or 0.37% after trading in a range of 8447.65 and 8504.00. There were 15 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were ITC up by 4.56%, Hindustan Unilever up by 2.29%, HCL Tech up by 1.95%, ONGC up by 0.99% and NTPC up by 0.98%.

On the flip side, Sun Pharma down by 6.15%, Dr. Reddy’s Lab down by 4.88%, Bharti Infratel down by 4.45%, Lupin down by 3.91% and Hindalco down by 3.75% were the top losers.

The Asian markets were trading mostly in red; Nikkei 225 decreased 290.79 points or 1.7% to 16,843.89, Jakarta Composite decreased 21.88 points or 0.41% to 5,307.62, Hang Seng decreased 16.53 points or 0.07% to 22,666.98, KOSPI Index decreased 2.95 points or 0.15% to 1,980.85 and FTSE Bursa Malaysia KLCI decreased 1.96 points or 0.12% to 1,646.12.

On the other hand, Shanghai Composite increased 2.41 points or 0.08% to 3,131.34 and Taiwan Weighted increased 3.76 points or 0.04% to 9,071.03.