Benchmarks continue to trade choppy in late afternoon session

Indian equity benchmarks continued to trade choppy in late afternoon session, as the quarterly reporting season kicked in, with investors concerned that the government's move to ban high-value notes would hit corporate earnings. Sentiments remained dampened with domestic rating agency, ICRA’s report that the advance estimate of 7.1 per cent GDP released by Central Statistical Organisation (CSO), will have major errors as it does not include the data for the months after demonetization. The agency pegged the expected growth for 2016-17 lower at 6.8 per cent. However, some support came with the Finance Minister Arun Jaitley’s statement that the currency squeeze in November and December failed to hit revenue mop up, with direct and indirect tax collection from April to December showing a double-digit increase. For the period April - December 2016, Direct Tax and Indirect tax collection have shown a growth of 12.01% and 25% respectively over the corresponding period last year.

On the global front, European markets were trading mostly in red, as investors remained on sidelines ahead of fresh data from the euro zone and volatility in oil markets. Asian markets were trading mostly in red. Back home, value buying in Realty, Auto and FMCG stocks also supported the markets. In scrip specific development, Havells India was trading in green after the company launched a unique offering of miniature circuit breaker (MCB) with enclosure christened as ‘REO Armour’.

The BSE Sensex is currently trading at 26766.12, up by 6.89 points or 0.03% after trading in a range of 26701.18 and 26860.88. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.29%, while Small cap index was up by 0.50%.
The top gaining sectoral indices on the BSE were Realty up by 0.97%, Auto up by 0.40%, FMCG up by 0.37%, Bankex up by 0.33% and IT up by 0.26%, while Power down by 0.74%, Oil & Gas down by 0.60%, PSU down by 0.29%, Consumer Durables down by 0.20% and Metal down by 0.06% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Auto up by 1.13%, Tata Motors up by 1.07%, Maruti Suzuki up by 0.92%, Reliance Industries up by 0.68% and ITC up by 0.66%. On the flip side, Dr. Reddys Lab down by 2.96%, ONGC down by 1.70%, Coal India down by 1.70%, Asian Paints down by 1.50% and NTPC down by 1.49% were the top losers.

Meanwhile, the Central Board for Direct Taxes (CBDT), in its year-end review 2016, has stated that General Anti-Avoidance Tax Rule (GAAR), which was originally to be implemented from April 1, 2014, will now come into effect from April 1, 2017. GAAR contains provision allowing the government to prospectively tax overseas deals involving local assets. In its year-end review, tax department listed its major achievements so far include, among others, Enactment of The Benami Transactions (Prohibition) Amendment Act, 2016, Implementation of The Direct Tax Dispute Resolution Scheme, 2016 and of GAAR from Assessment Year 2018-19.

During the 2015 Budget presentation, Finance Minister Arun Jaitley had said that GAAR implementation will be delayed by two years. Its implementation was repeatedly postponed because of the apprehensions expressed by foreign investors. Jaitley also said that the investments made up to March 31, 2017 shall not be subjected to GAAR, which was to be applied on those claiming tax benefits of over Rs 3 crore.

GAAR was part of the 2012-13 Budget speech of the then Finance Minister Pranab Mukherjee to check tax evasion and avoidance. There have been fears that the government may use it to target P-Notes. Through the use of GAAR, government may try to tax P-Notes as indirect investments, which could attract a tax rate of up to 15 per cent. To avoid tax altogether under GAAR, an investor may have to prove that P-Notes were not set up specifically to avoid paying taxes.

The CNX Nifty is currently trading at 8246.35, up by 2.55 points or 0.03% after trading in a range of 8227.75 and 8263.00. There were 27 stocks advancing against 24 stocks declining on the index.

The top gainers on Nifty were Tech Mahindra up by 1.28%, Eicher Motors up by 1.24%, Bajaj Auto up by 1.19%, HCL Tech. up by 1.18% and Indusind Bank up by 1.16%. On the flip side, Dr. Reddys Lab down by 3.02%, Coal India down by 1.86%, Asian Paints down by 1.76%, ONGC down by 1.73% and BPCL down by 1.50% were the top losers.

Asian markets were trading mostly in red; Jakarta Composite decreased 32.53 points or 0.61% to 5,314.50, Taiwan Weighted decreased 29.8 points or 0.32% to 9,342.42, FTSE Bursa Malaysia KLCI decreased 5.43 points or 0.32% to 1,670.06 and KOSPI Index decreased 0.34 points or 0.02% to 2,048.78. On the flip side, Shanghai Composite increased 16.92 points or 0.54% to 3,171.24 and Hang Seng increased 55.68 points or 0.25% to 22,558.69.

European markets were trading mostly in red; Germany’s DAX decreased 24.15 points or 0.21% to 11,574.86 and France’s CAC decreased 11.69 points or 0.24% to 4,898.15. On the flip side, UK’s FTSE 100 increased 17.86 points or 0.25% to 7,227.91.