Indian benchmarks lose steam after hitting fresh 52-week high

Indian equity benchmarks showed a volte-face on Thursday as what started on a promising note ended as a dismal show. Investors squared off position in the dying hours of trade as sentiments turned pessimistic on the report that GST Council has proposed to raise the peak tax rate to 20%, from the current 14%, in the model goods and services tax Bill to preclude the requirement of approaching Parliament for any change in rates in future. The change in the peak rate will not alter the 4-slab rate structure of 5, 12, 18 and 28 percent agreed upon last year, but is only a provision being built into the model law to take care of contingencies in future. Furthermore, traders remained cautious as Non-food credit, comprising loans given by banks to agriculture and allied activities, industry, services and personal segments, grew at a slower clip of 3.5% year-on-year in January 2017 as against 9.8% in the year-ago period. The slow growth in non-food credit shows that demand in the economy has not recovered after taking a beating during the 50-day demonetisation period between November 9 and December 30, 2016. Moreover, credit to agriculture and allied activities increased at a slower pace of 8.1% in January 2017, compared with a robust increase of 13.4% in January 2016. Adding anxiety among market participants, Moody's kept India's gross domestic product (GDP) forecast for FY17 at 6.9% and expects the full impact of demonetisation to reflect in the fourth quarter numbers. The ratings agency expects Q4 GDP to moderate to 6.4%. However, losses remained capped with the report that the government is expected to soon announce relaxations in the foreign direct investment (FDI) policy in certain sectors, including single brand retail. The further liberalisation in the FDI policy is aimed at providing better business environment by removing impediments. The government last year relaxed FDI norms in over a dozen sectors, including defence, civil aviation, construction and development, private security agencies, real estate and news broadcasting.

On the global front, Asian equity markets ended mostly higher on Thursday, as traders get some comfort from record performances in New York after upbeat US economic data and Donald Trump's conciliatory speech to Congress. The US president's much-anticipated address on Tuesday, while lacking details, was broadly welcomed as he promised a trillion-dollar infrastructure splurge and tax cuts -- music to bullish investors' ears. Further, Japan's Nikkei share average hit a 14-month high as the dollar gained against the yen on rising expectations the US Federal Reserve will hike interest rates in March. However, Chinese shares ended lower after a string of hawkish remarks from Federal Reserve officials stirred concerns that an interest rate hike in the US could trigger fresh capital outflows and hurt domestic liquidity. Meanwhile, European shares steadied early trade, pausing after a strong rally in the previous session.

Back home, after getting a firm start, the local benchmarks traded in a tight range for most part of the session, but witnessed sharp selling pressure in final four of trader, which dragged the indices to-day’s low point by close of trade. Finally, the NSE’s 50-share broadly followed index Nifty, took a cut of over half percent to settle below the crucial 8,900 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by around one fifty points and closed below the psychological 28,850 mark. Moreover, the broader markets had to bear a brutal assault today as they went on to underperform their larger peers by quite a margin with BSE’s midcap shaving off 1.41% and BSE’s smallcap shelving  1.30%. The market breadth on the BSE was pessimistic, as there were 957 shares on the gaining side against 1930 shares on the losing side, while 157 shares remained unchanged.

Finally, the BSE Sensex declined 144.70 points or 0.50% to 28839.79, while the CNX Nifty was down by 46.05 points or 0.51% to 8,899.75. 

The BSE Sensex touched a high and a low of 29145.62 and 28784.31, respectively and there were 7 stocks on gainers side as against 23 stocks on the losers side on the index.

The broader indices made a negative closing; the BSE Mid cap index declined 1.41%, while Small cap index was down by 1.30%.

The sole gaining sectoral index on the BSE was Auto up by 0.28%, while Realty down by 4.34%, Power down by 1.91%, Utilities down by 1.79%, Telecom down by 1.69% and PSU down by 1.59% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 2.66%, Bajaj Auto up by 2.12%, Hero MotoCorp up by 1.37%, TCS up by 0.85% and Hindustan Unilever up by 0.35%. On the flip side, Adani Ports & SEZ down by 3.07%, Sun Pharma down by 2.63%, NTPC down by 2.50%, Dr. Reddy’s Lab down by 1.98% and SBI down by 1.82% were the top losers.

Meanwhile, encouraged by stronger-than-expected quarterly gross domestic product (GDP) number, Finance Minister Arun Jaitley has said that a surprise 7 per cent economic growth in the October-December quarter was significantly impacted by demonetisation of high value currency notes. He also said that GDP data belies overstated claims made by many that rural sector was heavily in trouble. Jaitley also seemed to agree with RBI Governor Urjit Patel's statement of a sharp V-shaped recovery as remonetisation picks up.

The finance minister has stated that note ban, certainly, had led to the squeeze of currency because this was the period during which the replacement of high denomination currencies was taking place and many people were anxious to what its impact on overall economy would be. However, he said that with a 7 per cent growth in GDP the worst fears for the economy have been put behind. FM believes that the combination of demonetisation with remonetisation has been fruitful and the results are evident. 

Jaitley further said that he had consistently maintained that the revenue (tax collection) figures, which actually show the real level of growth, showed that the growth was there, and some areas could be adversely impacted, mainly those which were cash dominated and also a part of the shadow economy and even constituted parts of the informal economy. However, he noted that demonetisation has helped integration of informal with the formal economy. He also observed that the money that was deposited in the banks is now being spent through a system which is being recorded. 

Emphasizing growth in agriculture, FM said that this year growth is at a record high and has contributed to Q3 GDP. Similarly, he said that manufacturing increase has too contributed to the Q3 GDP and this was already reflected in the VAT data of the states and also the excise data of the Central revenue collection. Meanwhile, the Central Statistical Organisation (CSO) has projected a 7.1 per cent economic growth in the year ending March 31, the slowest since 2014 but still the fastest among major economies.

The CNX Nifty traded in a range of 8,992.50 and 8,879.80. There were 16 stocks in green as against 35 stocks in red on the index.

The top gainers on Nifty were Tata Motors - DVR up by 2.91%, Tata Motors up by 2.64%, Bajaj Auto up by 2.38%, Ultratech Cement up by 2.35% and Hero MotoCorp up by 1.63%. On the flip side, BPCL down by 4.31%, Idea Cellular down by 3.27%, Adani Ports & SEZ down by 2.89%, Sun Pharma down by 2.58% and NTPC down by 2.56% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 4.51 points or 0.06% to 7,378.39, Germany’s DAX decreased 10.97 points or 0.09% to 12,056.22 and France’s CAC decreased 1.6 points or 0.03% to 4,959.23.

Asian equity markets ended mostly higher on Thursday, with financials and material stocks leading gainers, after a rally on Wall Street overnight lifted the Dow Jones Industrial Average above the 21,000 mark for the first time ever. US President Donald Trump's much-anticipated debut address to Congress on Tuesday night offered little policy details on his stimulus plans, but investors were relieved by the President's more measured than expected tone and his apparent desire to pass an immigration reform bill that would give some illegal immigrants legal status. Meanwhile, Japan's Nikkei share average hit a 14-month peak as the yen weakened against the dollar on heightened expectations for the Federal Reserve to raise interest rates this month and after Wall Street soared to record highs. Though, Chinese shares ended lower after a string of hawkish remarks from Federal Reserve officials stirred concerns that an interest rate hike in the US could trigger fresh capital outflows and hurt domestic liquidity.