Benchmarks end with modest cut; Nifty holds 9,100 mark

Extending previous session’s southward journey, Indian equity benchmarks ended the session slightly in red on Tuesday. Soon after a positive start, markets entered into red terrain, as traders reacted negatively to SBI Research report which highlighted that if the UP government fulfils its farmer loan waiver promise, banks are likely to take a hit of Rs 27,420 crore and the scheme will lead to some stress on the state’s fiscal arithmetic. The BJP had in its UP election manifesto promised to waive farmers’ loans if elected to power. The report said that schedule commercial banks together had an outstanding farm credit of Rs 86,241.20 crore in UP with the average ticket size of Rs 1.34 lakh, as of 2016, most of which is to small and marginal farmers.

However, some recovery took place in last leg of trade and pared most of their initial losses, as investors opted to buy beaten-down but fundamentally strong stocks. Traders took some support with report that Cabinet cleared four supporting GST legislations, paving the way for their introduction in Parliament. Once approved by Parliament, the states would start taking their SGST bill for discussion and passage in the respective state assemblies.

Positive opening in European markets too provided some support, as investors eyed rising oil prices and intensifying talks between Greece and its euro zone creditors. Asian shares hit 15-month highs on Tuesday, while the dollar and US bond yields were on the back foot on the prospect of a less-hawkish Federal Reserve policy trajectory.

Back home, the Indian rupee strengthens against the US dollar at the time of closing at 65.27 from its previous close of 65.36. On the sectoral front, banking stocks edged lower after a foreign brokerage firm downgraded a slew of large Indian lenders, citing expectation of weak earnings. Stocks of some drug makers slumped on worries of regulatory action from the US Food and Drug Administration. Hectic pressure was witnessed in select oil companies after a parliamentary panel reported that upstream oil and gas producers will face substantial additional tax liability under the proposed GST regime due to the clipping of existing tax breaks, a higher tax rate on services and the temporary exclusion of five hydrocarbons from the new indirect tax system.

The NSE’s 50-share broadly followed index Nifty slipped marginally but hold its psychological 9,100 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined over thirty points to finish below its psychological 29,500 mark. Broader markets too witnessed selling pressure and ended the session with a cut of around quarter a percent. The market breadth remained in favor of decliners, as there were 1,089 shares on the gaining side against 1,692 shares on the losing side, while 193 shares remain unchanged.

Finally, the BSE Sensex decreased 33.29 points or 0.11% to 29,485.45, while the CNX Nifty was down by 5.35 points or 0.06% to 9,121.50. 

The BSE Sensex touched a high and a low of 29,585.05 and 29,380.14, respectively and there were 15 stocks each on gainers and losers on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.45%, while Small cap index was down by 0.19%.

The top gaining sectoral indices on the BSE were Realty up by 1.35%, FMCG up by 1.01%, Basic Materials up by 0.37%, IT up by 0.33% and TECK was up by 0.24%, while Healthcare down by 1.44%, Bankex down by 0.59%, Telecom down by 0.58%, Energy down by 0.50% and Auto was down by 0.43% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 1.97%, ONGC up by 1.60%, Infosys up by 1.12%, Larsen & Toubro up by 0.73% and Hindustan Unilever was up by 0.35%. On the flip side, Dr. Reddy’s Lab down by 4.36%, Axis Bank down by 3.28%, GAIL India down by 1.41%, Maruti Suzuki down by 1.40% and Reliance Industries was down by 1.29% were the top losers.

Meanwhile, moving one more step ahead towards the roll out of the country’s biggest tax regime from July 2017, the Union Cabinet, chaired by Prime Minister Narendra Modi, has approved four supporting GST legislations—the Compensation Law, the central GST (CGST), integrated GST (IGST) and Union Territory GST (UTGST). These bills will be introduced as Money Bills in Parliament this week. Once approved by Parliament, the states would start taking their SGST bill for discussion and passage in the respective state assemblies. 

The GST Council, in its previous two meetings, had given approval to the four legislations as also the State-GST (S-GST) bill. While the S-GST has to be passed by each of the state legislative assemblies, the other four other laws have to be approved by Parliament. Once approved, levy of GST will get legal backing. The government is hoping the C-GST, I-GST, UT-GST and the GST Compensation laws will be approved in the current session of Parliament and state legislatures will soon clear the S-GST bills so that the GST regime can be implemented from July 1.

After the implementation of GST regime, a composite GST will be levied on sale of goods or rendering of services and the revenue would be split between Centre and states in almost equal proportion. This is because central taxes like excise and service tax and state levies like VAT will be subsumed in the GST. On the other hand, the CGST will give powers to the Centre to levy GST on goods and services after Union levies like excise and service tax are subsumed, while the IGST is to be levied on inter-state supplies. Moreover, the SGST will allow states to levy the tax after VAT and other state levies are subsumed in the GST and the UTGST will also go to Parliament for approval.

The CNX Nifty traded in a range of 9,147.75 and 9,087.20. There were 24 stocks in green as against 27 stocks in red on the index.

The top gainers on Nifty were Grasim Industries up by 2.78%, ITC up by 2.13%, ONGC up by 1.68%, Bharti Infratel up by 1.51% and Ambuja Cement was up by 1.26%. On the flip side, Idea Cellular down by 4.86%, Dr. Reddy’s Lab down by 4.06%, Axis Bank down by 2.89%, Yes Bank down by 2.05% and Aurobindo Pharma was down by 1.87% were the top losers.

European markets were trading mostly in green; Germany’s DAX increased 10.15 points or 0.08% to 12,063.05 and France’s CAC was up by 12.44 points or 0.25% to 5,024.60, while UK’s FTSE 100 was down by 15.73 points or 0.21% to 7,414.08.

Asian equity markets ended mostly in green on Tuesday as crude oil prices advanced in Asian deals on speculation that OPEC members are likely to extend output cuts beyond June. Chinese stocks ended higher despite signs of tighter liquidity in the banking system. China's central bank should clarify its new short-term policy rate and the target rate level as soon as possible, a central bank working paper said, as authorities in the world's second-largest economy slowly shift to a tightening bias. Though, Japanese shares ended slightly lower due to selling pressure following a public holiday on Monday, as a weakening of the US dollar against the yen added to worries over protectionist moves under US President Donald Trump. The omission of the customary pledge to avoid protectionism from a statement by the Group of 20 major economies over the weekend underscored the challenges to free trade that have coincided with Trump’s vows to rewrite trade deals.