Benchmarks trade in green; Sensex above 27500 mark

Indian equity benchmarks continued their firm trade in the late morning session extending gains for the third straight session on fresh buying ahead of  January F&O expiry and Union Budget next week. Foreign Portfolio Investors (FPIs) bought shares worth a net Rs 93.95 crore, while Domestic Institutional Investors (DIIs) also bought shares worth a net Rs 533.49 crore, on January 24, 2017. Traders took some encouragement with report that Donald Trump and Narendra Modi have discussed opportunities to strengthen the partnership between the United States and India in broad areas such as the economy and defense. Some support also came with a private report which said that the Indian government is expected to continue with fiscal consolidation and deliver a popular, but not a populist budget with a fiscal deficit target of 3% in 2017-18. Separately, another report highlighted that the forthcoming Union Budget is likely to stay away from any harsh measures amid heightened economic uncertainty and the country facing considerable challenges from the demonetization induced demand shock. Meanwhile, a high-level committee on digital payments has suggested a tax to discourage cash transactions, a cap on the maximum allowable limit for large-size cash transactions and a complete abolition of charges on card payments to incentivize digital transactions.

Traders were seen piling position in Consumer Durables, Realty and Metal stocks, while selling was witnessed in IT and TECK sector stocks. In scrip specific development, Bharti Airtel was trading under pressure on registering its lowest bottom line figures in four years as demonetization and intense competition with Reliance Jio hit revenues. Consolidated net profit in October-December quarter declined nearly 55 percent to Rs 503.7 crore as against Rs 1,108.1 crore in the same period a year ago. Wockhardt was trading in red after reporting a consolidated net loss of Rs 53.91 crore for the third quarter ended December 31, 2016, hit by subdued US business and demonetization in India. The company had posted a consolidated net profit of Rs 72.04 crore in the same quarter last fiscal. The market may remain volatile today as traders may roll over positions in the Futures & Options (F&O) segment from the near month i.e. January 2017 series to next month i.e. February 2017 series. The near month January 2017 derivatives contracts will expire today i.e. January 25, 2017.

On the global front, Asian shares were trading in green, following a stronger Wall Street as investors welcomed US President Donald Trump’s eagerness to deliver on his campaign promises, coupled with better than expected Japanese exports data and South Korean GDP figures. Japan’s exports rose for the first time in 15 months in December on strong sales of electronics and car parts, a positive sign for the export-reliant economy even as US protectionism threatens to hurt trade across the region and dent external demand. Back home, the NSE Nifty and BSE Sensex were trading above the psychological 8,500 and 27,500 levels respectively. The market breadth on BSE was positive in the ratio of 1346:817, while 177 scrips remained unchanged.

The BSE Sensex is currently trading at 27502.03, up by 126.45 points or 0.46% after trading in a range of 27439.68 and 27514.49. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.30%, while Small cap index was up by 0.66%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.43%, Realty up by 1.09%, Metal up by 0.89%, Capital Goods up by 0.78% and Bankex up by 0.70%, while IT down by 0.16% and TECK down by 0.15% were the losing indices on BSE.

The top gainers on the Sensex were HDFC up by 2.19%, Tata Steel up by 1.88%, Axis Bank up by 1.46%, Adani Ports & Special Economic Zone up by 1.18% and ONGC up by 0.99%.

On the flip side, Bharti Airtel down by 1.79%, Wipro down by 0.64%, Reliance Industries down by 0.42%, Dr. Reddy’s Lab down by 0.35% and Mahindra & Mahindra down by 0.30% were the top losers.

Meanwhile, in order to crack down on shell companies, the Central Board of Direct Taxes (CBDT) has issued guiding principles on the Place of Effective Management (POEM) of a Company to determine its tax liability. The new tax rules require foreign firms in India and Indian firms with overseas subsidiaries to pay local taxes based on where the business if effectively controlled.

CBDT has said that the main purpose of introducing POEM is to target shell companies and companies which are created for retaining income outside India although real control and management of affairs is located in India. The tax department further said that this would help target shell companies, or holding companies, incorporated overseas to avoid taxes by showing their residency as a tax haven even though the management and effective decision making takes place in India. It also said the intent is not to target Indian multinationals which are engaged in business activity outside India.

As per the guidelines issued by CBDT, the new rules require company's residency to be determined by persons exercising effective control over decision making and the place where such control is exercised from. The guidelines also included that the place where these management decisions are taken would be more important than the place where such decisions are implemented. It added that for the purpose of determination of POEM it is the substance which would be conclusive rather than the form.

The long awaited POEM rules are effective from April 1, 2016 and will not be applicable to firms with annual turnover of less than Rs 50 crore. The concept of POEM to decide the residential status of a company was introduced by the Finance Act, 2015.

The CNX Nifty is currently trading at 8515.95, up by 40.15 points or 0.47% after trading in a range of 8493.95 and 8520.50. There were 31 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 2.62%, HDFC up by 2.15%, Tata Steel up by 1.96%, Kotak Mahindra Bank up by 1.45% and Axis Bank up by 1.39%.

On the flip side, Idea Cellular down by 2.24%, Bharti Airtel down by 1.91%, Tech Mahindra down by 1.22%, HCL Technologies down by 0.46% and Reliance Industries down by 0.40% were the top losers.

The Asian markets were trading in green; KOSPI Index increased 1.31 points or 0.06% to 2,067.07, FTSE Bursa Malaysia KLCI increased 2.81 points or 0.17% to 1,683.50, Shanghai Composite increased 4.48 points or 0.14% to 3,147.03, Jakarta Composite increased 6.9 points or 0.13% to 5,298.98, Hang Seng increased 17.9 points or 0.08% to 22,967.76 and Nikkei 225 increased 227.48 points or 1.21% to 19,015.47.

Taiwan Stock Exchange was closed on account of ‘Non Trading Day’.