Markets extend the weakness with a modestly lower start

Mirroring the global markets, Indian equities too have made a soft start, though the weakness is modest in the early deals and the benchmarks extending last session decline have lost another quarter percent. Traders were concerned with continued increase in the chance that the US Federal Reserve will raise interest rates at its next monetary policy meeting later this month, which could lead to foreign fund outflow from the emerging markets. On the domestic front, traders were a bit concerned with the GST Council deciding to peg the peak goods and services tax (GST) rate at 40 per cent in the legislation instead of 28 per cent, giving it the flexibility to raise rates without having to reach out to Parliament. Though, 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 for the moment. The broader markets too were trading in red, while on sectoral front, energy, telecom and realty was witnessing some buying, the FMCG and IT were dragging the markets lower.

The BSE Sensex is currently trading at 28778.32, down by 61.47 points or 0.21% after trading in a range of 28736.10 and 28847.97. There were 13 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.32%, while Small cap index was lower by 0.08%.

The top gaining sectoral indices on the BSE were Energy up by 1.21%, Telecom up by 0.85%, Realty up by 0.64%, Oil & Gas up by 0.40% and Utilities up by 0.37%, while FMCG down by 0.90%, IT down by 0.44%, Auto down by 0.44%, Bankex down by 0.40% and Consumer Disc down by 0.32% were the losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 3.30%, GAIL India up by 0.98%, Dr. Reddy’s Lab up by 0.69%, Cipla up by 0.67% and Axis Bank up by 0.60%. On the flip side, HDFC down by 1.68%, ITC down by 1.66%, Asian Paints down by 1.18%, Tata Steel down by 0.83% and ICICI Bank down by 0.74% were the top losers.

Meanwhile, in order to obviate the need for approaching Parliament for any change in rates in future, the GST Council has proposed to raise the peak tax rate to 40 percent after the GST Council proposed raising the peak rate in the Bill to 20 percent, from the current 14 percent, in the model goods and services tax (GST) Bill. Though, 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. The highest rate levied on goods will still be 28 per cent (14 per cent central GST and 14 per cent state GST). Demerit and luxury goods will attract higher 28 per cent rate plus cess.

The GST Council, headed by Finance Minister Arun Jaitley and comprising representatives of all states, has agreed to keep the upper band of the rate in the law at 20 percent. This means the central GST (CGST) and state GST (SGST) can be up to 20 percent each, leaving the scope for a maximum levy at 40 percent. Mirroring the model GST law, the CGST, SGST and UTGST law will be firmed up by the Centre, states and Union Territories, respectively. The Centre plans to introduce in Parliament the CGST Bill in the forthcoming session beginning March 9. After it is ratified, the states will introduce the SGST Bill in their respective legislative Assemblies.

Meanwhile, the central and state officials will soon start the exercise to determine which goods and services should fall in which tax bracket and the same will be taken to the Council for approval soon. Together with this, they will also decide the goods and services that would attract a cess on top of the peak rate to create a corpus that can be used to compensate states for any loss of revenue from implementation of GST in the first five years.

The CNX Nifty is currently trading at 8867.55, down by 32.20 points or 0.36% after trading in a range of 8862.45 and 8898.50. There were 19 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 3.83%, Reliance Industries up by 2.93%, Tata Power up by 1.73%, Grasim Industries up by 1.63% and Hindalco up by 1.61%. On the flip side, Bosch down by 1.91%, HDFC down by 1.88%, ITC down by 1.81%, BPCL down by 1.43% and Infosys down by 1.32% were the top losers.

All the Asian markets were trading in red, Hang Seng declined by 146.98 points or 0.62% to 23,581.09, Nikkei 225 lost 124.43 points or 0.64% to 19,440.37, Taiwan Weighted decreased by 35.37 points or 0.36% to 9,656.43, KOSPI Index was down by 28.49 points or 1.35% to 2,074.16, Jakarta Composite was lower by 13.04 points or 0.24% to 5,395.22, Shanghai Composite declined by 12.05 points or 0.37% to 3,217.98 and FTSE Bursa Malaysia KLCI was lower by 7.5 points or 0.44% to 1,708.17.