Benchmarks continue weak trade; Metal, Realty drag

Indian equity benchmarks continued their weak trade in late morning session due to profit booking by investors. Apart from profit booking and sustained capital outflows by foreign funds, weak trends in other Asian bourses mainly dampened the sentiments. Foreign investors have pulled out a massive $3.5 billion from the capital market this month so far following rate hike by the US Federal Reserve. Most of the outflows by the Foreign Portfolio Investors (FPIs) have been witnessed in the debt markets during the period under review. The latest FPI outflows took place following a withdrawal of over Rs 49,700 crore on net basis from the capital market (equity and debt) in last two months (October-November). The sentiments were under pressure with Prime Minister Narendra Modi’s statement that his government would not hesitate to make tough decisions to help support its growing economy and his suggestion that people earning from financial markets must make a fair contribution to nation building. The comments were interpreted as a pitch for higher taxes on income from capital markets. Some pressure also crept in with domestic rating agency ICRA’s latest report that India’s gross value added growth is likely to be at 6.6 percent in 2016-17 as economic activity will take more time to normalize following the government’s move to demonetize high-value notes. The street maintained cautious approach as the GST Council could not evolve a consensus on the issue of dividing the administrative powers between the Centre and states in its two-day meeting which concluded on Friday even as it cleared all other provisions of draft model GST Bill and whole of compensation Bill. The next meeting of the GST Council will take place on January 3 and 4.

The market may remain volatile this week as traders may roll over positions in the Futures & Options (F&O) segment from the near month i.e. December 2016 series to next month i.e. January 2017 series. The near month December 2016 derivatives contracts will expire on Thursday i.e. December 29, 2016. Traders were seen selling in Metal, Realty and PSU sector stocks. In scrip specific development, Divi’s Laboratories continued its selling spree on concerns over US regulatory issues. There have been reports which states that the US regulator has made strong observations about the pharma company’s Vishakhapatnam facility, including documentation and records not maintained or inaccurate falsified. Jyoti Structures was trading under pressure after Dubai-based Amin Group called off negotiations with troubled EPC firm for a stake sale after they failed to find common ground though the lenders are keen to recover dues of more than Rs 2,000 crore.

On the global front, Asian shares were trading mixed, with several of the markets remaining closed for the Christmas holiday. Investors chose to remain on the sidelines in the absence of fresh cues. The Japanese market, which resumed trading after a three-day holiday, is modestly lower despite the positive cues from Wall Street on Friday. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 7,950 and 25,900 levels respectively. The market breadth on BSE was negative in the ratio of 398:1654, while 94 scrips remained unchanged.

The BSE Sensex is currently trading at 25828.24, down by 212.46 points or 0.82% after trading in a range of 25753.74 and 26008.57. There were 3 stocks advancing against 27 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.43%, while Small cap index was down by 1.42%.

The top losing sectoral indices on the BSE were Metal down by 2.61%, Realty down by 2.38%, PSU down by 1.31%, Bankex down by 1.26% and Power down by 0.97%, while there were no gainers.

The top gainers on the Sensex were Maruti Suzuki up by 0.61%, Dr. Reddy’s Lab up by 0.42% and Lupin up by 0.04%.

On the flip side, Cipla down by 2.99%, Axis Bank down by 1.97%, Coal India down by 1.56%, Tata Steel down by 1.56% and Mahindra & Mahindra down by 1.53% were the top losers.

Meanwhile, in order to reduce market fears, Union Finance Minister Arun Jaitley has clarified that there is no intention of government to impose long-term capital gains tax on securities transactions in the upcoming budget. The clarification comes a day after Prime Minister Narendra Modi reportedly dropped a clue on increasing taxes on capital markets and the necessity for all sections, including market players to contribute to the national building through taxes.

Jaitley also said that the speech by government has been misinterpreted by a section of the media which has started speculating that this is an indirect reference to the fact that there could be tax on long-term capital gains. He further said that this clarification is absolutely erroneous as Prime Minister has not made such statement directly or indirectly.

Presently, long-term capital gains on the sale of listed securities are tax free. These are profits on sale of shares on a stock exchange platform after a holding period of one year or more. Profit gained from securities transaction in less than one year is called short-term capital gains, which are taxed at a flat rate of 15% at present. At the same time, all stock market transactions attract securities transaction tax (STT) in a range between 0.017% and 0.125%.

The CNX Nifty is currently trading at 7915.70, down by 70.05 points or 0.88% after trading in a range of 7893.80 and 7970.05. There were 4 stocks advancing against 47 stocks declining on the index.

The top gainers on Nifty were Dr. Reddy’s Lab up by 0.55%, Maruti Suzuki up by 0.48%, TCS up by 0.19% and Reliance Industries up by 0.07%.

On the flip side, Hindalco down by 3.95%, Cipla down by 2.94%, Yes Bank down by 2.67%, Aurobindo Pharma down by 2.56% and Bank of Baroda down by 2.32% were the top losers.

The Asian markets were trading mixed; Shanghai Composite decreased 24.5 points or 0.79% to 3,085.71 and Nikkei 225 decreased 11.63 points or 0.06% to 19,416.04.

On the other hand, KOSPI Index increased 1.39 points or 0.07% to 2,037.29 and Taiwan Weighted increased 36.18 points or 0.4% to 9,114.82.

Hong Kong Stock Exchange, Jakarta Stock Exchange, Kuala Lumpur Stock Exchange and Singapore Stock Exchange were closed on account of national holiday.