Benchmarks make weak start to new series

Indian equity benchmarks have made a negative start to April Series and are trading marginally in red in early deals on Friday. However, losses remained capped with GST development, as with GST rollout looking imminent from July 1 after the Lok Sabha's approval, the Centre and states will sit together today to finalise rules and regulations of the new indirect tax regime. The GST Council has already approved five sets of rules relating to registration, payments, refund, invoice and returns. Losses also remained limited with report that foreign portfolio investors (FPIs) bought shares worth a net Rs 67.97 crore, while Domestic institutional investors (DIIs) also bought shares worth a net Rs 1,701.79 crore on Thursday.

On the global front, the Asian markets were trading mixed with some indices trading in red. The Japanese market was however trading higher by around half a percent after Japan’s core consumer prices rose slightly for a second month in February, while the jobless rate dropped to the lowest level since 1994. The US markets closed in green with tech heavy Nasdaq setting record closing high in the last session.

Back home, aviation stocks viz. Spicejet and Indigo remained on buyers’ radar, as the UDAAN scheme has been rolled out and five airlines will operate on 128 routes connecting over 30 unserved airports under the regional connectivity scheme wherein fares are capped at Rs 2,500 for one-hour flights. Stocks related to coal and mining space too edged higher, on report that the government plans to amend the rules for auctioning of coal mines through competitive bidding.

The BSE Sensex is currently trading at 29617.40, down by 30.02 points or 0.10% after trading in a range of 29574.89 and 29665.24. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.46%, while Small cap index was up by 0.50%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.32%, Energy up by 1.16%, Metal up by 1.00%, Basic Materials up by 0.94% and PSU was up by 0.70%, while Telecom down by 1.19%, Realty down by 0.32%, TECK down by 0.29%, IT down by 0.27% and Bankex was down by 0.13% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 1.22%, Reliance Industries up by 1.01%, Axis Bank up by 0.69%, Power Grid up by 0.69% and SBI was up by 0.59%. On the flip side, HDFC Bank down by 1.13%, Wipro down by 0.94%, HDFC down by 0.82%, TCS down by 0.68% and Adani Ports was down by 0.68% were the top losers.

Meanwhile, the share of foreign portfolio investments (FPI) through participatory notes (P-notes) has decreased to Rs 1.70 lakh crore at the end of February. According to Securities and Exchange Board of India (SEBI) data, total value of P-Notes investments in Indian markets including equity, debt and derivatives, at February-end declined to Rs 1,70,191 crore, from Rs 1,75,088 crore at the end of January.

Of the total, P-Note holdings in equities at February-end were at Rs 103,712 crore, while in debts and derivatives, were at Rs 11,700 crore and Rs 54,778 crore respectively. The quantum of FPI investments via P-notes decreased to 6.6 percent in February, from 7.1 percent in the preceding month. Last year, in December, investment through P-notes was the lowest since July 2013, when the aggregate value of such investment stood at Rs 148,188 crore. Investment through the route had been declining since September last year when it was at Rs 212,509 crore. It fell to Rs 199,987 crore at October-end and further to Rs 179,648 crore in November.

P-notes are typical instruments issued by registered FPIs to overseas investors who wish to participate in Indian markets without registering themselves directly in the country to save time. Meanwhile, the Indian government's new tax treaty with Singapore and Mauritius will come into effect from April 1, 2017, and the capital inflow into the Indian market via P-notes is likely to see a sharp fall. According to the changed double taxation anti-avoidance agreements (DTAAs), all investments made from these jurisdictions would attract short-term capital gains as the exemptions would get removed. As per SEBI data, nearly 90 percent of P-note investments are routed through Singapore and Mauritius, with which the Indian government has reworked tax arrangements.

As per the new treaty, capital gains that arise from shares purchased after April 1 by foreign investors based in these countries can be taxed in India. Accordingly, a capital gains tax of at least 7.5 percent can be charged on short-term gains from equity of investors from Mauritius and Singapore over the next two years and 15 percent after that. Besides the higher tax outgo, issuers of P-notes are more worried about operational difficulties.

The CNX Nifty is currently trading at 9166.35, down by 7.40 points or 0.08% after trading in a range of 9153.85 and 9181.25. There were 29 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were Indian Oil was up by 2.69%, BPCL up by 1.93%, Hindalco up by 1.58%, Tata Steel up by 1.46% and Zee Entertainment up by 1.40%. On the flip side, Bharti Infratel down by 3.49%, HDFC Bank down by 1.40%, Wipro down by 0.91%, Bharti Airtel down by 0.87% and Grasim Industries was down by 0.81% were the top losers.

Asian markets were trading mixed; KOSPI Index rose 0.24 points or 0.01% to 2,164.88, Jakarta Composite gained 1.42 points or 0.03% to 5,594.37, Shanghai Composite added 9.17 points or 0.29% to 3,219.40 and Nikkei 225 was up by 90.71 points or 0.48% to 19,153.93.

On the flip side, Hang Seng decreased 117.17 points or 0.48% to 24,183.92, Taiwan Weighted slipped 17.5 points or 0.18% to 9,830.65 and FTSE Bursa Malaysia KLCI was down by 6.53 points or 0.37% to 1,742.72.