Benchmarks end a lackluster session with modest cut; Nifty ends below 8100 mark

Indian benchmarks indices extended the sorrow of closing in the red territory for the fifth consecutive session on Tuesday as investors shied away from taking any big bets on rising geopolitical concerns in Turkey, Germany and Switzerland. Sentiments took a hit after Global financial services major Nomura revised upwards India's current account deficit (CAD) forecast to 1.4% of GDP for the current fiscal from 0.4% earlier. According to Nomura, India's trade deficit widened to a 16-month high of $13 billion in November from $10.4 billion in October, as a result of a sharp slowdown in exports after demonetization and a pickup in imports, led by gold and higher commodity prices. For the fourth quarter (October-December) of 2016 Nomura expects a current account deficit of 2.5% of GDP (versus 0.9% earlier) and for the January-March period, it is likely to be around 2% of GDP. Trading sentiments weakened further on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 535.77 crore on December 19, 2016. The downside reamined capped with Finance Minister Arun Jaitley’s statement that Reserve Bank of India was fully prepared to deal with currency shortages post demonetisation and has enough currency in its chests to last 'far beyond' December 30, 2016. Some support also came with NITI Aayog member Ramesh Chand’s statement that despite the impact of demonetisation, growth in agriculture for the current year will still be above 5 per cent, though he pointed that the prevailing cash crunch has hit the growers of perishables more compared to those who grow bulk crops such as paddy and cotton. Meanwhile, Aviation stocks came under pressure after the report that India’s Airlines industry may have to bear an additional tax burden of up to Rs 15,000 crore annually once the Goods and Services Tax (GST) is implemented. The additional tax burden may push airlines, most of which have turned profitable, into losses again, coming as it does at a time when global fuel prices are flaring up.

On the global front, Asian markets ended mixed on Tuesday, with Chinese and Hong Kong shares ending in the red on waning hopes for additional monetary stimulus and concerns surrounding a tighter regulatory environment. Market participants remained cautious after U.S. Federal Reserve Chair Janet Yellen gave an upbeat view of the jobs market, strengthening the rate hike outlook for next year. Yellen said on Monday that the U.S. labour market had improved to its strongest in nearly a decade, suggesting that wage growth was picking up and underscoring expectations that the central bank would continue to raise interest rates next year. However, Japanese market ended higher after the market digested the Bank of Japan's decision to maintain current monetary policy. Bank of Japan kept monetary policy steady and gave a more upbeat view of the economy on Tuesday, reinforcing market expectations that its future policy direction could be an increase - not a cut - in interest rates. Meanwhile, European stock markets moved mostly higher, with Italian banks among the biggest gainers after news the country’s government is preparing a bailout package for struggling lenders.

Back home, after getting a positive start, the local benchmarks showed some strength in early trades, but the sentiments turned pessimistic in noon trades and indices start drifting lower, tracking weak trade in other regional markets. Thereafter, the indices traded in tight range below neutral line with moderate losses for most part of the session. Finally, the NSE’s 50-share broadly followed index - Nifty settled with modest losses of twenty one points, below the psychological 8100 levels, while Bombay Stock Exchange’s Sensitive Index - Sensex shed sixty six points and closed below the psychological 26350 mark. Moreover, the broader markets failed to show any kind of fervor and settled on an uninspiring note, underperforming their larger peers by a fat margin. On the BSE sectoral space, banking index remained the top laggard in the space and settled with over a percent laceration followed by the PSU and Metal pockets which went home with over half a percent cuts. On the flipside, IT, TECK and Consumer Durables pockets managed to go home with moderate gains.

The market breadth remained pessimistic as there were 832 shares on the gaining side against 1777 shares on the losing side, while 144 shares remained unchanged. Finally, the BSE Sensex declined by 66.72 points or 0.25% to 26307, while the CNX Nifty dropped 21.95 points or 0.27% to 8,082.40.

The BSE Sensex touched a high and a low of 26435.56 and 26241.43, respectively and there were 11 stocks on gainers side against 19 stocks on the losers side on the index. 

The broader indices made a negative closing; the BSE Mid cap index ended lower by 1.40%, while Small cap index was down by 0.92%.

The top gaining sectoral indices on the BSE were IT up by 0.95%, TECK up by 0.75%, Consumer Durables up by 0.31% and FMCG up by 0.04%, while Bankex down by 1.26%, PSU down by 0.90%, Metal down by 0.87%, Auto down by 0.84% and Oil & Gas down by 0.67% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 2.20%, GAIL India up by 1.11%, ITC up by 1.01%, Coal India up by 0.99% and NTPC up by 0.97%. On the flip side, SBI down by 2.62%, ICICI Bank down by 2.18%, Bajaj Auto down by 2.13%, Lupin down by 1.74% and Tata Steel down by 1.73% were the top losers.

Meanwhile, in order to promote cashless payments, the government has said that small traders and businesses with a turnover of up to Rs 2 crore will pay less tax if they accept payments through digital mode such as Debit/Credit Cards, Mobile Wallets and Prepaid Loyalty Cards.

Central Board of Direct Taxes (CBDT) has said that under section 44AD of the Income-Tax Act, 1961, it has been decided to reduce the existing rate of deemed profit of 8% to 6% in respect of the amount of total turnover or gross receipts received through digital mode for the financial year 2016-17. However, it added that  the existing rate of deemed profit of 8% as stated in section 44AD of the I-T Act, shall continue to apply if total turnover or gross receipts are received in cash. The tax body also said that legislative amendment in this regard would be carried out through the Finance Bill, 2017.

Under the existing provisions of Section 44AD of the Income-Tax Act, in case of certain assesses (an individual, HUF or a partnership firm other than LLP) carrying on any business having a turnover of Rs 2 crore or less, the profit is deemed to be 8% of the total turnover for taxation. The decision has been taken to achieve the government’s mission of moving towards a less-cash economy and to incentivise small traders/businesses to proactively accept payments through digital modes.

The CNX Nifty traded in a range of 8,124.10 and 8,062.75. There were 20 stocks in green against 31 stocks in red on the index.

The top gainers on Nifty were TCS up by 2.23%, Ambuja Cement up by 1.91%, UltraTech Cement up by 1.84%, ACC up by 1.37% and ZEEL up by 1.59%. On the flip side, Idea Cellular down by 3.93%, Aurobindo Pharma down by 3.64%, Bosch down by 3.08%, Yes Bank down by 2.78% and SBI down by 2.41% were the top losers.

The European markets were trading mostly in red; UK’s FTSE 100 decreased 14.51 points or 0.21% to 7,002.65 and Germany’s DAX decreased 8.63 points or 0.08% to 11,418.07, while France’s CAC increased 6.17 points or 0.13% to 4,828.94.

Asian stocks ended mixed on Tuesday, with Chinese and Hong Kong shares ending in the red on waning hopes for additional monetary stimulus and concerns surrounding a tighter regulatory environment. China's central bank said it would tighten supervision of shadow banking businesses by including off-balance sheet wealth management products into its risk-assessment framework next year. Meanwhile, Japanese shares ended higher after the market digested the Bank of Japan's decision to maintain current monetary policy, and the yen's fall versus the dollar lifted overall sentiment. The Bank of Japan kept its monetary policy settings unchanged, as widely expected, saying the economy continues to recover moderately as a trend.