Weak trade prevails in late morning session

Indian equity benchmarks continued their weak trade in late morning session as investors continued to book profits and stayed on the fence ahead of results of assembly elections next week. The rupee opened lower against dollar on Friday on account of buying of American currency by banks and importers. 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. Some selling also crept in after a research report by brokerage firm notified that the third quarter GDP or gross domestic product, numbers may have been inadvertently exaggerated by the Central Statistical Organisation (CSO), the agency primarily responsible for releasing the numbers, as there was no clear gauge for the informal sector. A report by the foreign brokerage firm highlighted that even as global economy looks to be on a rather bumpy ride, Indian exports, which are mainly dependent on the US, China and Europe have still not recovered. India’s merchandise export growth turned decisively positive last September after nearly two years of contraction. Yet, there is a wide variance for these exports by destination.

Investors took cautious approach after the GST Council 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, to obviate the need for approaching Parliament for any change in rates in future. This is only an enabling provision and the highest rate levied on goods will still be 28% (14% central GST and 14% state GST). The demerit and luxury goods will attract higher 28 rate plus cess. This provision will also allow the government to remove the cess at some stage and instead have a higher GST rate only, which will make for a neater GST. Traders were seen piling position in Telecom, Energy and Realty stocks, while selling was witnessed in FMCG, IT and Bankex sector stocks. In scrip specific development, Hindalco Industries was trading in green as its capital raising committee approved opening of its Qualified Institutional Placement (QIP) at a floor price of Rs 184.45 per equity share. DCB Bank was trading in green after the lender on Thursday informed bourses that a meeting of the board of directors will be held on March 07, to consider and approve issue of securities to Qualified Institutional Buyers.

On the global front, Asian shares were trading in red, as traders become increasingly confident the Federal Reserve will hike interest rates this month. Japan’s core consumer prices rose for the first time in over a year in January due to a pickup in energy costs and private consumption, offering some hope for the central bank's efforts in accelerating inflation to its 2 percent target. Data in China showed the Caixin services PMI edged down o 52.6, well below the 53.3 seen as consumer spending during the Chinese New Year holidays may not have been as robust as expected. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 8,900 and 28,800 levels respectively. The market breadth on BSE was negative in the ratio of 1090:1135, while 121 scrips remained unchanged.

The BSE Sensex is currently trading at 28792.65, down by 47.14 points or 0.16% after trading in a range of 28736.10 and 28847.97. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.03%, while Small cap index was up by 0.13%.

The top gaining sectoral indices on the BSE were Telecom up by 1.28%, Energy up by 1.09%, Realty up by 0.73%, Utilities up by 0.70% and Oil & Gas up by 0.54%, while FMCG down by 0.76%, IT down by 0.40%, Bankex down by 0.31%, Capital Goods down by 0.22% and Auto down by 0.20% were the losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 2.63%, GAIL India up by 1.36%, Cipla up by 0.95%, Dr. Reddy’s Lab up by 0.79% and Bharti Airtel up by 0.70%.

On the flip side, ITC down by 1.55%, HDFC down by 1.38%, Asian Paints down by 1.35%, Infosys down by 0.73% and TCS down by 0.53% 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 8882.40, down by 17.35 points or 0.19% after trading in a range of 8862.45 and 8898.50. There were 25 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 4.16%, Reliance Industries up by 2.32%, Hindalco up by 2.01%, Tata Power up by 1.79% and Grasim Industries up by 1.76%.

On the flip side, Bosch down by 2.15%, HDFC down by 1.53%, ITC down by 1.53%, Asian Paints down by 1.38% and IndusInd Bank down by 1.16% were the top losers.

The Asian markets were trading in red; Hang Seng decreased 164.98 points or 0.7% to 23,563.09, Nikkei 225 decreased 130.53 points or 0.67% to 19,434.27, Taiwan Weighted decreased 40.28 points or 0.42% to 9,651.52, KOSPI Index decreased 25.46 points or 1.21% to 2,077.19, Shanghai Composite decreased 13.87 points or 0.43% to 3,216.15, Jakarta Composite decreased 11.87 points or 0.22% to 5,396.38 and FTSE Bursa Malaysia KLCI decreased 7.08 points or 0.41% to 1,708.59.