Indian benchmarks unable to gather stem; end on a flat note

Indian benchmark indices ended the range bound day of trade on a flat note with positive bias as investors preferred to stay on the sidelines ahead of the Reserve Bank of India's (RBI’s) policy meeting next week. Sentiments got some support with the American industry bodies lauding the Budget, saying Finance Minister Arun Jaitley has done an 'admirable job' in creating a vision that will propel the domestic economy while remaining cognizant about foreign investors eying the Indian market. However, investors remained cautious with the report that India’s services languished, with new business orders falling for the third straight month, amid muted inflationary pressure that could offer RBI much room to remain accommodative in its next policy meet next week. The Nikkei India Services Purchasing Managers’ Index (PMI), which tracks services sector companies on a monthly basis, came in at 48.7 in January, from 46.8 in December 2016. A reading above 50 indicates expansion while any score below the mark denotes contraction. Meanwhile, shares of public sector undertaking (PSU) banks extended their rally for the third straight trading sessions post Budget. Around six PSU banks, including Bank of Baroda, Bank of India, IDBI Bank, Indian Bank, Union Bank of India and Vijaya Bank have hit their respective 52-week highs on the in other wise range-bound market. On the other hand, auto stocks declined after the report that the automobile sales in January were a mixed bag in all segments, including passenger cars, two-wheelers and commercial vehicles, as rural markets have still not picked up. In scrip specific development, Sun TV Network hogged the limelight by gaining as much as 26% after a special CBI court on Thursday dropped all charges against former telecom minister Dayanidhi Maran and Sun TV promoter Kalanithi Maran in the Aircel-Maxis case. Also, shares of Bombay Stock Exchange (BSE) made a strong debut on Friday, with the scrip listing at Rs 1,085, a 35% premium over the issue price of Rs 806 on the NSE. The stock eventually settled the trade 33% higher at Rs 1,070 against its issue price.

On the global front, Asian equity markets ended mostly in green on Friday, with Japanese shares closing higher after the yen weakened and the Nikkei survey showed that Japan's services sector continued to expand in January, although at a slower pace, with a PMI score of 51.9. However, Chinese stocks slumped after Beijing unexpectedly raised short-term interest rates, adding to growing concerns about US President's Donald Trump's aggressive policies. The Caixin China manufacturing purchasing managers' index dropped to 51 from 51.9 in December, suggesting a loss of momentum in output and new orders. Meanwhile, Investors all around the world await the outcome of a key U.S. monthly jobs report later in the day that will set the tone for the Federal Reserve's policy outlook.

Back home, the local benchmarks got off to a sedate opening tracking the dismal leads prevailing in Asian markets on growing concerns about US President's Donald Trump's aggressive policies. Thereafter, the frontline indices kept losing steam and even drifted to the lowest point in the session in noon trades. However, the key gauges managed to gain some momentum and bounced into the positive terrain by the end of trade. Eventually, the NSE’s 50-share broadly followed index Nifty, added single digit gains to settle above the crucial 8,700 support level, while Bombay Stock Exchange’s Sensitive Index or Sensex gained around thirteen points and ended above the psychological 28,200 mark. Moreover, broader markets managed a touch better than the larger peers as the BSE’s midcap and smallcap indices settled with gains of 0.61% and 1.08% respectively.

The market breadth remained optimistic, as there were 1655 shares on the gaining side against 1163 shares on the losing side, while 156 shares remained unchanged.

Finally, the BSE Sensex gained 13.91 points or 0.05% to 28240.52, while the CNX Nifty was up by 6.70 points or 0.08% to 8,740.95. 

The BSE Sensex touched a high and a low of 28280.58 and 28127.18, respectively and there were 15 stocks on gainers side as against 15 stocks on the losers side on the index.

The broader indices ended in green; the BSE Mid cap index jumped 0.61%, while Small cap index was up by 1.08%.

The top gaining sectoral indices on the BSE were PSU up by 0.95%, Realty up by 0.91%, TECK up by 0.85%, Capital Goods up by 0.73% and IT up by 0.66%, while Auto down by 0.78%, Consumer Durables down by 0.77%, Metal down by 0.56%, Oil & Gas down by 0.13% and FMCG down by 0.10% were the top losing indices on BSE.

The top gainers on the Sensex were Cipla up by 4.18%, Coal India up by 1.81%, SBI up by 1.72%, Axis Bank up by 1.49% and Dr. Reddy’s Lab up by 1.47%. On the flip side, Tata Motors down by 1.57%, ICICI Bank down by 1.45%, Reliance Industries down by 1.06%, Power Grid down by 1.03% and Tata Steel down by 0.95% were the top losers.

Meanwhile, the government has said that General Anti-Avoidance Rules (GAAR) and Place of Effective Management (POEM) will be implemented from April 1, 2017 and added that cannot be delayed any more. On GAAR, Revenue Secretary Hasmukh Adhia has said that it seeks to prevent companies from routing transactions through other countries to avoid taxes. He also said that tax department feels that the adoption of anti-abuse rules in tax treaties may not be sufficient to address all tax avoidance strategies and the same are required to be tackled through domestic anti-avoidance rules. He also noted that under GAAR, the taxmen may potentially want to know whether the transaction was done in the normal course of business or conducted simply with the intention to avoid taxes.

In clarification on implementation of POEM, Adhia said that it requires foreign companies in India and domestic firms with overseas subsidiaries to pay local taxes based on where the business is effectively controlled but will not apply to companies having a turnover or gross receipts of Rs 50 crore or less in a financial year. He also said that this would help target shell companies, or holding companies, incorporated overseas to evade taxes by showing their residency as a tax haven even though the management and effective decision-making takes place in India.

Explaining further he said that POEM is not for Indian companies doing genuine business outside. It is for those companies which are creating structures outside the country, mainly to get passive income from stocks and investments. He also said that POEM guidelines make it clear that if you have got active business outside India, POEM will not apply. He also highlighted that if out of the total income, 51 per cent comes from active business outside India, and even if 49 per cent comes from passive business then also POEM will not apply.

The CNX Nifty traded in a range of 8,748.25 and 8,707.75. There were 25 stocks in green as against 25 stocks in red on the index, while one stock remained unchanged.

The top gainers on Nifty were Bank of Baroda up by 4.73%, Tech Mahindra up by 4.32%, Cipla up by 4.17%, BHEL up by 2.55% and Bharti Infratel up by 2.19%. On the flip side, Bosch down by 2.60%, Zee Entertainment Enterprises down by 2.44%, Eicher Motors down by 1.93%, Tata Motors - DVR down by 1.91% and Tata Motors down by 1.72% were the top losers.

The European markets were trading in red; UK’s FTSE 100 increased 33.47 points or 0.47% to 7,174.22, Germany’s DAX increased 26.11 points or 0.22% to 11,654.06 and France’s CAC increased 39.67 points or 0.83% to 4,833.96.

Asian equity markets ended mostly higher on Friday, with Japanese shares closing higher after the yen weakened and the Nikkei survey showed that Japan's services sector continued to expand in January, although at a slower pace, with a PMI score of 51.9. That's down from 52.3 in December, although it remains well above the boom-or-bust line of 50 that separates expansion from contraction. The composite PMI came in at 52.3, down from 52.8 in December. However, Chinese shares ended lower after returning from a week-long holiday, as a private Chinese manufacturing survey missed forecasts and China's central bank surprised markets by raising its short-term lending rates. The Caixin China manufacturing purchasing managers' index dropped to 51 from 51.9 in December, suggesting a loss of momentum in output and new orders. The manufacturing PMI provides an overall view of activity in China's manufacturing sector, and is a closely watched indicator of economic health. Meanwhile, investors turned cautious ahead of the release of the US monthly jobs data due later in the day. The Labor Department's closely-watched report is expected to show an increase of 175,000 jobs in January after an increase of 156,000 jobs in the previous month. The unemployment rate is expected to hold at 4.7 percent.