Firm trade prevails in late morning session

Indian equity benchmarks continued their firm trade in late morning session on account of buying in front line blue chip counters. The frontline gauges managed to hold their crucial 8,250 (Nifty) and 26,700 (Sensex) mark. Investors took support with CBEC Chairman Najib Shah’s statement that the GST Council may in future decide to reduce the tax slabs under the Goods and Services Tax (GST) regime after analyzing the revenue garnered and the compensation payouts to states. He said that any change in tax slab is possible after assessing the revenues and the effect of exemptions and deductions given in the new tax regime and analyzing it with the expenditure. Some buying crept in with Prime Minister Narendra Modi’s statement that demonetization triggered an unprecedented cash crunch in the country, but defended his decision saying it will lead to long-term gains. Modi added that the government’s measure will bring a degree of inconvenience but this short-term pain will pave way for long-term gains. The decision has several gains for farmers, traders, labourers who are the economic backbone of our nation. Separately, a month after Rs 500 and Rs 1000 notes were demonetized, Union Finance Minister Arun Jaitley has announced a slew of measures to promote the use of digital payments. The Finance Ministry announced a total of eleven measures.

The upside was however capped with reports that the fast-growing automobile sector in the country has posted a decline - the first time this year - of about 5% in November, hit by the demonetization hurdle. Commercial vehicles, two- and three-wheelers all posted a decline. This was the steepest in the past 44 months. The sector had declined 7.75 percent in March 2013. The last time the sector posted a decline was December 2015, when volumes fell by only 0.17 percent.  Additionally, Fitch in its report has warned that banks in China and India will continue to remain under pressure next year due to mounting bad loans, even though earnings and capital buffers are strong enough to withstand any serious threat. In the 2017 outlook on Asia-Pacific banks, Fitch said, most of Asia-Pacific’s banks are facing a cyclical deterioration in asset quality in 2017, as a challenging economic environment continues to put pressure on borrowers. Traders were seen piling position in IT, TECK and Consumer Durables stocks, while selling was witnessed in Metal and Auto sector stocks.

On the global front, Asian shares were trading mostly in red, while Japanese stocks rose to their highest level in a year supported by Wall Street gains and solid buying of exporters on the back of a weaker yen. Back home, the NSE Nifty and BSE Sensex were trading above the psychological 8,250 and 26,700 levels respectively. The market breadth on BSE was positive in the ratio of 1292:771, while 117 scrips remained unchanged.

The BSE Sensex is currently trading at 26765.17, up by 70.89 points or 0.27% after trading in a range of 26707.81 and 26803.26. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.20%, while Small cap index was up by 0.60%.

The top gaining sectoral indices on the BSE were IT up by 1.12%, TECK up by 0.89%, Consumer Durables up by 0.80%, FMCG up by 0.61% and PSU up by 0.40%, while Metal down by 0.21% and Auto down by 0.08% were the losing indices on BSE.

The top gainers on the Sensex were SBI up by 1.73%, Infosys up by 1.54%, ITC up by 1.50%, ONGC up by 1.31% and Tata Motors up by 1.07%.

On the flip side, Bajaj Auto down by 1.69%, Coal India down by 1.22%, HDFC down by 1.02%, Hero MotoCorp down by 0.74% and HDFC Bank down by 0.66% were the top losers.

Meanwhile, amid industry’s demand of lowering of proposed GST rates of 5 per cent, 12 per cent, 18 per cent and 28 per cent post the demonetization, Central Board of Excise and Customs (CBEC) Chairman Najib Shah has said that in future the GST Council may reduce the tax slabs under the new tax regime. He noted that reduction in tax slab is possible after assessing the revenues, the effect of exemptions and deductions given in the GST regime, and analysing it with the expenditure.

The CBEC chairman said that the officers committee has already started work on which goods is to be placed in which tax bracket and the final call would be taken by the GST Body. He said that the central government has committed to compensating the states for five years. Now it is a huge burden which the central government has cast upon itself.

Shah further said that the Council has to take into consideration the range of products under new tax regime and the political compulsion of every state while taxing them. He also said that the underlying theme is GST will increase revenues and the need for compensation perhaps will be lesser.

He added that at the last meeting, the Council agreed on a four-slab structure of 5, 12, 18 and 28 per cent along with a cess on luxury and ‘sin’ goods such as tobacco. He said that the Centre and the states have collected Rs 8 lakh crore from indirect taxes, minus customs duty, and the same level of revenue had to be collected in the GST regime.

The CNX Nifty is currently trading at 8260.10, up by 13.25 points or 0.16% after trading in a range of 8241.95 and 8271.90. There were 28 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 2.20%, Bank of Baroda up by 1.86%, Tech Mahindra up by 1.74%, SBI up by 1.56% and Infosys up by 1.50%.

On the flip side, Bharti Infratel down by 2.26%, Bajaj Auto down by 1.93%, Coal India down by 1.39%, HDFC down by 1.29% and Bosch down by 1.18% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 91.21 points or 0.4% to 22,770.63, Jakarta Composite decreased 14.58 points or 0.27% to 5,289.16, KOSPI Index decreased 6.15 points or 0.3% to 2,024.92 and FTSE Bursa Malaysia KLCI decreased 4.24 points or 0.26% to 1,639.51.

On the other hand, Taiwan Weighted increased 5.94 points or 0.06% to 9,381.80, Shanghai Composite increased 25.12 points or 0.78% to 3,240.49 and Nikkei 225 increased 212.93 points or 1.13% to 18,978.40.