Post Session: Quick Review

Indian equity benchmarks traded on a firm note and ended the session with modest gains even as fears of global uncertainties on the US President-elect Donald Trump’s policies are likely to weigh. The markets made a gap-up opening and traded jubilantly in early deals, after a significant relief to foreign investors, the Central Board of Direct Taxes has put in abeyance a recent circular that amplified concerns over a potential rise in tax liability, clarifying the indirect transfer provisions, which had led to retrospective tax cases like that of Vodafone. Benchmark indices as well as broader markets later turned volatile erasing most of morning gains. Some support also came with a UN report which highlighted that India is still the fastest growing large developing economy and that the country would grow by 7.7 percent in the financial year 2017 and 7.6 percent in 2018. The United Nations World Economic Situation and Prospects (WESP) 2017 report has said that India’s economy is projected to grow by 7.7 percent in fiscal year 2017 benefiting from strong private consumption and gradual introduction of significant domestic reforms. Minor profit booking crept in after a private poll report showed that India’s economy lost momentum in the final three months of 2016 after Prime Minister Narendra Modi’s ban on high-value notes hurt consumption and businesses but it is set to pick up this quarter. Having posted growth of above 7 percent for six consecutive quarters, India’s gross domestic product is expected to have expanded just 6.5 per cent in the October-December quarter - the weakest in nearly three years.

On the global front, Asian markets closed mostly in green, followed by a sharp correction overnight in the dollar that sapped investors’ momentum. Japan stocks closed higher as gains in the Insurance, Transport and Mining sectors led shares higher. China stock exchange closed in green taking a lead with house price data supporting sentiments. Growth in China’s home prices moderated slightly in December as local governments stepped up curbs to tame speculation which some fear is fuelling a property bubble. European shares edged mostly higher helped by a slew of well-received company results. British Prime Minister Theresa May’s speech on Brexit continued to weigh, while upbeat earnings reports lent support.

The BSE Sensex ended at 27260.08, up by 24.42 points or 0.09% after trading in a range of 27217.65 and 27422.67. There were 18 stocks advancing against 12 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 0.44%, while Small cap index was up by 0.61%. (Provisional)

The top gaining sectoral indices on the BSE were Metal up by 2.27%, Consumer Durables up by 0.85%, Capital Goods up by 0.65%, Bankex up by 0.53% and FMCG up by 0.45%, while Oil & Gas down by 0.19%, TECK down by 0.01% and Auto down by 0.01% were the few losing indices on BSE. (Provisional)

The top gainers on the Sensex were Hindustan Unilever up by 2.94%, Tata Steel up by 2.84%, ONGC up by 1.62%, Mahindra & Mahindra up by 0.85% and TCS up by 0.81%. (Provisional)

On the flip side, NTPC down by 1.65%, Bharti Airtel down by 1.20%, GAIL India down by 1.13%, Hero MotoCorp down by 1.12% and Bajaj Auto down by 0.84% were the top losers. (Provisional)

Meanwhile, relieving the anxiety of foreign portfolio investors (FPIs) over the issue of multiple taxation, the government has said that it is putting on hold its recent circular on taxation of indirect transfers. On December 21, 2016, the Central Board of Direct Taxes (CBDT) had issued a circular applying indirect transfer provisions on FPIs whereby any profits made by funds with the underlying assets would have been taxed, including equities in India.

The circular was intended to provide clarity on the circumstances in which the indirect transfer provisions are to be applied but it failed to address the concerns of various stakeholders, chiefly FPIs, with regard to issues like potential double and triple taxation, onerous compliance requirements, and lack of tax neutral foreign corporate restructuring. It also gave rise to fears of retrospective taxation as the principal amendment to the Income Tax Act on indirect transfers was such in nature.

CBDT in a notification said that after the issue of the aforementioned circular, representations were received from various FPIs, foreign institutional investors (FIIs), venture capital funds (VCFs) and other stakeholders. The stakeholders have presented their concerns stating that the circular does not address the issue of possible multiple taxation of the same income. It added that the representations made by the stakeholders are currently under consideration and examination and the operation of the above-mentioned circular is kept in abeyance for the time being. Application of these provisions would have subjected foreign portfolio investors to greater scrutiny by the Income Tax department and would have led to double-taxation in many cases. The circular would have put at risk particularly the 181 publicly traded funds whose India exposure is more than half of total assets.

The CNX Nifty ended at 8413.75, up by 15.75 points or 0.19% after trading in a range of 8397.40 and 8460.30. There were 26 stocks advancing against 25 stocks declining on the index. (Provisional)

The top gainers on Nifty were Ultratech Cement up by 3.66%, BHEL up by 3.63%, Hindalco up by 3.57%, Tata Steel up by 3.19% and Aurobindo Pharma up by 2.91%. (Provisional)

On the flip side, Idea Cellular down by 2.82%, NTPC down by 1.76%, GAIL India down by 1.71%, Hero MotoCorp down by 1.62% and Bosch down by 1.43% were the top losers. (Provisional)

The European markets were trading mostly in green; UK’s FTSE 100 increased 10.34 points or 0.14% to 7,230.72, Germany’s DAX increased 19.12 points or 0.17% to 11,559.12 and France’s CAC decreased 15.17 points or 0.31% to 4,844.52.

Asian equity markets ended mostly in green on Wednesday, led by a surge in energy companies after oil climbed above $52 per barrel. Japanese stocks ended up, with export-oriented shares receiving a boost from a weaker yen. Meanwhile, investors remained cautious in the wake of President-elect Donald Trump's charge that a strong dollar is hurting the economy. Trump's remarks sparked a selloff in the US currency, adding to earlier weakness after British Prime Minister Theresa May confirmed a ‘hard’ exit from the European Union.