Benchmarks make soft start on somber global cues

Indian equity benchmarks have made a sluggish start and are trading slightly in red in early deals on Tuesday, as traders opted to book profit after four days of consecutive rally amid somber global cues. Traders remained concerned with Commerce Minister Nirmala Sitharaman’s statement that the proposed changes in the regime for issuing H-1B visas for skilled workers by the US government will have an impact on Indian companies and the Commerce Ministry will soon hold a meeting with the industry to discuss its strategy for dealing with it. Traders also remained on sidelines ahead of Reserve Bank of India’s (RBI) sixth bi-monthly monetary policy review meet beginning later today.

Global cues too dampened sentiments with most of the Asian counters trading in red at this point of time, as economic and political fears sent investors seeking shelter in the yen, while forecasts China’s foreign exchange reserves has fallen for a seventh month added to jitters. US stocks slipped on Monday, led by the energy sector as oil prices dropped, while investors awaited the next run of major earnings reports and sought further clarity on President Donald Trump's economic policies. Back home, sentiments also remained dampened on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 403.52 crore on February 6, 2017. However, the market breadth indicating the overall health of the market was strong, with 1171 shares gaining and 878 shares declining, while a total of 86 shares were unchanged.

The BSE Sensex is currently trading at 28419.20, down by 20.08 points or 0.07% after trading in a range of 28361.97 and 28483.41. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.29%, while Small cap index was up by 0.38%.

The top gaining sectoral indices on the BSE were Metal up by 0.96%, Consumer Durables up by 0.69%, Telecom up by 0.66%, FMCG up by 0.62% and Capital Goods was up by 0.52%, while Auto down by 0.78%, Industrials down by 0.16%, Energy down by 0.13%, Bankex down by 0.02% and TECK was down by 0.02% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 1.41%, Sun Pharma up by 1.10%, Tata Steel up by 0.86%, GAIL India up by 0.61% and NTPC was up by 0.55%. On the flip side, Tata Motors down by 1.81%, Bajaj Auto down by 1.09%, Mahindra & Mahindra down by 1.03%, ICICI Bank down by 0.79% and Hindustan Unilever was down by 0.67% were the top losers.

Meanwhile, allaying investor fears over levy of long-term capital gains tax, the government will come out with an exhaustive list of transactions on which the anti-abuse provision of levying long-term capital gains tax on share transfer in unlisted companies will not be applicable. Finance Minister Arun Jaitley in his Budget for 2017-18, had proposed 10% long-term capital gains tax on those who acquired shares in unlisted companies after October 1, 2004, if they had not paid securities transaction tax (STT) at the time of purchase.

The Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra has said that the provision was introduced in Budget 2017-18 to plug bogus long-term capital gains being availed by investment in penny stocks and put an end to sham transactions. He added that they are taking information from all stakeholders and they will give a very exhaustive list as to where Section 10(38) will not be applicable. He said that it is anti-abuse law which they have brought in and it will be used where the law is abused.

Chandra also said that genuine investors in IPO or those which have come in through FDI need not worry as there will be no change in policy with regard to capital gains. He also said that they will come out with clarification as to what kind of share transactions will be put under this provision, so that there is no harassment. Chandra added that their purpose is everyone should be tax compliant.

As per the tax department, the route of long-term capital gains in unlisted shares was being misused in the last 2-3 years and estimated that 'bogus' gains availed by 'khoka' (shell) companies last year were Rs 80,000 crore. Chandra said out of 15 lakh companies incorporated under Ministry of Corporate Affairs, only 6 lakh companies file Income Tax returns. Out of that 2.5 lakh companies show losses or zero income and 2.85 lakh companies disclose income less than Rs 1 crore. While only 36,500 companies file income tax return showing income over Rs 1 crore.

The CNX Nifty is currently trading at 8791.60, down by 9.45 points or 0.11% after trading in a range of 8773.55 and 8809.30. There were 23 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were BHEL up by 2.74%, Bharti Infratel up by 2.02%, Hindalco up by 1.29%, ITC up by 1.25% and Kotak Mahindra Bank was up by 1.19%. On the flip side, Tata Motors down by 1.94%, Zee Entertainment down by 1.92%, Tata Motors - DVR down by 1.80%, Ultratech Cement down by 1.38% and Ambuja Cement was down by 1.29% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 decreased 51.18 points or 0.27% to 18,925.53, Hang Seng dipped 37.65 points or 0.16% to 23,310.59, Shanghai Composite dropped 9.79 points or 0.31% to 3,147.20, Jakarta Composite slipped 3.69 points or 0.07% to 5,392.31, FTSE Bursa Malaysia KLCI shed 2.97 points or 0.18% to 1,688.27 and KOSPI Index was down by 2.14 points or 0.1% to 2,075.52. On the flip side, Taiwan Weighted was up by 13.52 points or 0.14% to 9,551.53.