Sensex comes off the day’s highs in Monday noon trades

Stock markets in India have lost some ground from the high point of the day in the Monday afternoon trading session. The benchmark equity indices, which were gradually gaining momentum since the start and touched the day’s highs in late morning trades, witnessed some profit booking and have currently found some support around the important psychological 17,300 (Sensex) and 5,200 (Nifty) levels. The subdued European market opening weighed on domestic sentiments after reports showed Spain’s economic growth declined 0.3% in the first quarter however, the number was better than expectations of 0.4% decline. While the Asian markets too were unable to give any direction to local bourses as they exhibited mixed trend on a day when the Chinese and Japanese markets remained closed for a public holiday. Market’s mood also was undermined to some extent after reports showed global rating agency Moody's will be reviewing ICICI Bank, Axis Bank and HDFC Bank for a potential downgrade. Meanwhile, the quarterly earnings announcement from the banking counter remained mixed as on one hand, investors commended Bank of India’s performance which was better than the Street’s expectations, while on the other, they punished the Oriental Bank of Commerce for reporting weaker than forecasted numbers. Besides, investors were seen covering short positions in the badly beaten down IT and TECk counters which rallied over one and half a percent each and supported the frontline gauges. However, the defensive Healthcare pocket was among the prominent losers in the sectoral space which along with the FMCG counter capped the upside chances for domestic bourses. Most sugar stocks including Shree Renuka and Bajaj Hindustan along with and shares of textile companies like Arvind, Alok Industries etc traded with notable gains ahead of a meeting called upon by Indian Prime Minister Manmohan Singh to deliberate on the objections raised by Agriculture Minister Sharad Pawar over the export of farm commodities such as sugar and cotton.

Moreover, the broader markets too came off from their intraday high levels in tandem with their larger peers, and were trading with moderate gains of around half a percent. The bourses consolidated on weak volumes of over Rs 0.5 lakh core, on the second day of a new F&O series. While the market breadth on BSE was in favor of advances in the ratio of 1421:1053 while 104 scrips remained unchanged.

The BSE Sensex is currently trading at 17,298.86 up by 111.52 points or 0.65% after trading as high as 17,359.18 and as low as 17,195.51. There were 23 stocks advancing against 7 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index gained 0.40% and Small cap rose 0.51%.

On the BSE sectoral space, IT up 2%, TECk up 1.65%, Realty up 1.30%, Bankex up 0.84% and PSU up 0.75% were the major gainers, while Healthcare down 0.44%, Auto down 0.15% and FMCG down 0.09% were the only laggards in the space.

TCS up 3.05%, DLF up 2.99%, Infosys up 2.26%, ICICI Bank up 1.62% and Hero Moto up 1.49% were the major gainers on the Sensex, while Maruti down 2.19%, BHEL down 1.90%, M&M down 1.06%, Sun Pharma down 1.04% and Tata Motors down 0.18% were the major losers in the index.

Meanwhile, exports from SEZs continued their sluggish trend for yet another year. According to the data by the Export Promotion Council for EOUs and SEZs (EPCES), exports from special economic zones (SEZs) grew by 15% year-on-year to Rs 3.6 lakh crore in 2011-12 compared to last year’s figure of Rs 3.1 lakh crore.

The slowdown in exports from the SEZs is being observed since past two years now. In the year 2010-11, exports grew by 43.1% and in 2009-10 they registered a growth of 121.4%. The year 2009-10 showed a huge increase due to a very low base in 2008-09 after the financial meltdown in US. Anyhow, there is no denying the fact that SEZs have been facing a slowdown with the decline growing steeper with each passing year. Moreover exports from SEZs have also come down as a proportion of total merchandise exports from the country to 26.7% in 2011-12 as compared to nearly 30% in the preceding years.

The steep declines have been attributed to the imposition of Minimum Alternate Tax (MAT) on the book profits of SEZ developers, units and the dividend distribution tax (DDT), both of which were levied in the budget 2011-12. These taxes have left the SEZ units with very little tax incentives vis-à-vis non-SEZ units. Now the concerns over DTC have added to their woes. Of late the SEZ developers have been concerned over the deadline for the profit-linked deductions with introduction of the Direct Tax Code (DTC) from April 1, 2013.

The DTC, which is expected to replace existing Indian Income Tax Act 1961, intends to cut tax rates to bring more people and companies under the tax net, phase out profit-linked exemptions for companies and replace them with investment-linked incentives.  SEZ developers are not in favour of the DTC being implemented next year. They are of the opinion that the DTC should not be implemented till 2015 as it will further impact exports and investments.

They have pointed out that imposition of such taxes is not beneficial in case of SEZs because they make SEZs unattractive. In fact the difference in benefits is not much as compared to the promotional benefits available to units outside SEZs. Consequently, no new investment is encouraged and the units that have already got permission become reluctant to start operations.  Hence, the SEZ developers are of the opinion that the government should take some positive policy decisions to make SEZs attractive or it will be very difficult to arrive at the growth rates of the pre-crisis levels.

Government has so far granted 589 approvals for setting up SEZs, out of which, seven are promoted by central government and 12 SEZs have been formulated by different states. However, up to March 31, 2012, only 389 SEZs have been notified and just 153 SEZs are in operation. IT, IT-hardware, petroleum, engineering, leather and garments are the leading exports from the SEZs.

The S&P CNX Nifty is currently trading at 5,243.55, higher by 34.55 points or 0.66% after trading as high as 5,262.15 and as low as 5,201.45. There were 36 stocks advancing against 14 declines on the index.

The top gainers on the Nifty were TCS up 3.30%, DLF up 3.26%, R Infra up 3.05%, IDFC up 2.75% and Infosys up 2.30%.

Maruti down 2.07%, BHEL down 2%, Ranbaxy down 1.85%, Dr Reddy’s down 1.42% and M&M down 0.99% were the major losers on the index.

In the Asian space, Hang Seng surged 1.49%, KLSE Composite added 0.29%, Seoul Composite gained 0.34% and Taiwan Weighted rose 0.28%.

On the other hand, Jakarta Composite eased 0.25% and Straits Times fell 0.11%.

Meanwhile, stock markets in Japan remained closed on Monday on account of Bridge Public Holiday while the Chinese bourses too were shut owing to May Day holidays and will re-open directly on Wednesday.

The European markets got off to a flat start as France’s CAC 40 eased 0.22%, Germany’s DAX rose 0.54% and Britain’s FTSE 100 fell 0.02%.