Benchmarks trade slightly in red in late morning session

Indian equity benchmarks continued their weak trade in late morning session tracking negative cues from overseas market and on failure to break deadlock on new sales tax. Italian Prime Minister Matteo Renzi announced his resignation on suffering a crushing defeat in a referendum on constitutional reform. Italy citizens’ ‘NO’ in referendum on Sunday has already been priced in by global markets. Back home, the sentiments were under pressure with Indian Finance Minister Arun Jaitley’s plan to launch a new national sales tax next April got a jolt on Saturday after a two-day meeting with state officials ended without the resolution of a deadlock on who would administer the tax. The long-awaited Goods and Services Tax (GST) would transform Asia’s No.3 economy into a single market, could boost revenues through better compliance and make life simpler for businesses that now pay a host of federal and state levies. Finance Minister Arun Jaitley has said that ‘Discussions on dual control of assessees remain inconclusive. They will be carried forward in the next GST Council meeting, which is slated to meet again on December 11 and 12’.

Some selling also crept in after Nikkei IHS Markit stated that the performance of India’s service sector weakened in November as a result of cash shortages. New business declined for the first time since June 2015, leading to a solid reduction in activity. Correspondingly, backlogs of work rose, while employment increased only marginally. Dropping from 54.5 to 46.7 in November, the seasonally adjusted headline Business Activity Index registered in contraction territory for the first time since June 2015 and pointed to the sharpest reduction in output for almost three years. Investors will be keeping an eye on RBI monetary policy review scheduled on Wednesday whereby the street expects Reserve Bank Governor Urjit Patel to again go in for a 0.25% interest rate cut with an aim to cushion the impact of demonetization. This will be the first monetary policy review after demonetization of old Rs 500 and Rs 1,000 currency notes following which banks witnessed surge in deposits. Traders were seen selling in FMCG, Auto and Metal stocks, while selling was witnessed in IT, TECK and Consumer Durables sector stocks.

On the global front, Asian shares were trading mostly in red, as investors feared the ‘NO’ vote in Italy’s referendum on Sunday could hurt the country’s banking system and spark global contagion. Growth in China’s services sector accelerated to a 16-month high in November, a private survey showed, though the increase in new orders dipped slightly and business expectations moderated. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 8,100 and 26,300 levels respectively. The market breadth on BSE was positive in the ratio of 1223:852, while 97 scrips remained unchanged.

The BSE Sensex is currently trading at 26206.23, down by 24.43 points or 0.09% after trading in a range of 26151.16 and 26273.29. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.33%, while Small cap index was up by 0.19%.

The top gaining sectoral indices on the BSE were FMCG up by 0.92%, Auto up by 0.64%, Metal up by 0.56%, PSU up by 0.41% and Power up by 0.34%, while IT down by 0.67%, TECK down by 0.39%, Consumer Durables down by 0.12% and Realty down by 0.07% were the losing indices on BSE.

The top gainers on the Sensex were Lupin up by 2.29%, Bharti Airtel up by 1.99%, Hindustan Unilever up by 1.86%, ONGC up by 1.60% and Mahindra & Mahindra up by 1.52%.

On the flip side, HDFC down by 2.75%, TCS down by 1.88%, Wipro down by 0.90%, HDFC Bank down by 0.55% and Coal India down by 0.36% were the top losers.

Meanwhile, for the third time in a month, the Goods and Services Tax Council, chaired by Finance Minister Arun Jaitley, failed to reach an agreement on the contentious issue of dual control. Though, the GST council discussed draft laws needed to facilitate rollout of the tax reform but progress on finalising them was limited, therefore the council is scheduled again to meet on December 11 and 12. 

The Finance Minister has said that the draft CGST and SGST laws were discussed in the last meeting, though approval will take some time. He expressed confidence that there is a positive movement as far as laws are concerned during the next meeting, but 2-3 suggestions have come on the critical issue of cross empowerment. He also noted that the roll out of GST bill before September 16, 2017 has become a constitutional requirement.

Jaitley further said that they have started approving the laws clause by clause and almost 9 chapters of each have been discussed. They are heading towards consensus on these laws. There are two other laws includes Compensation and IGST which will be discussed in the next meeting. He added that the issue of dual control linked IGST remains unresolved and will discuss this as well in the next meeting.

The next GST council meeting will attempt to hammer out the differences on which assessees will be controlled by states and who would be governed by centre, as also approving the draft supporting legislation CGST and SGST. Moreover, the Council will also have to approve a law detailing compensation to states for loss of revenue in the first five years of the rollout and Integrated GST (IGST). Finance Minister had recently said that rolling out GST before September 16 has become a constitutional necessity as states will not be able to collect their share of taxes henceforth, there is no scope to delay the decision any further.

The CNX Nifty is currently trading at 8085.10, down by 1.70 points or 0.02% after trading in a range of 8071.90 and 8103.30. There were 29 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were Lupin up by 2.33%, Bosch up by 2.25%, Hindustan Unilever up by 2.06%, Bharti Airtel up by 2.01% and Bharti Infratel up by 1.97%.

On the flip side, HDFC down by 2.60%, Grasim Industries down by 1.99%, Zee Entertainment down by 1.91%, TCS down by 1.62% and Tata Motors - DVR down by 1.18% were the top losers.

The Asian markets were trading mostly in red; Nikkei 225 decreased 151.57 points or 0.82% to 18,274.51, Hang Seng decreased 56.48 points or 0.25% to 22,508.34, Shanghai Composite decreased 44.98 points or 1.39% to 3,198.87, Taiwan Weighted decreased 17.04 points or 0.19% to 9,172.45 and KOSPI Index decreased 5.07 points or 0.26% to 1,965.54.

On the other hand, FTSE Bursa Malaysia KLCI increased 0.63 points or 0.04% to 1,629.59 and Jakarta Composite increased 19.29 points or 0.37% to 5,265.25.