Firm trade prevails in late morning session

Indian equity benchmarks continued their firm trade in late morning session on account of buying in frontline blue chip counters, as the Street cheered the rates for the new GST. The Indian rupee strengthened against the US dollar in opening trade. Traders reacted positively to the Goods and Services Tax (GST) Council finalizing tax rates of goods and services under the four-slab structure with essential items of daily use being kept in the lowest bracket of 5 percent. The Council fixed the rates for over 1200 items under the Goods and Services tax. Lots of daily consumption items such as milk, fruit and vegetables, jaggery or gur, foodgrain and cereals have been exempted from tax, while others such as sugar, tea, coffee, edible oil, mithai, and newsprint have been placed in the lowest slab of 5 percent. Traders were seen piling position in FMCG, Realty and Power stocks, while selling was witnessed in IT, TECK and Consumer Durables stocks.

Shares of microfinance companies displayed mixed reactions after India Ratings in its report highlighted that recovery of high cash based lending by micro-finance institutions is still a concern. Delinquencies in these loans rose sharply after the November 2016 high value note ban. The rating firm said that its delinquency index rose 24 times to 10.82% in February 2017 from 0.45% in October 2016. In scrip specific development, Housing and Urban Development Corporation (HUDCO) listed at a premium against its Initial Public Offer (IPO) price on the exchange. The IPO of HUDCO saw huge demand from investors and was subscribed nearly 80 times. Dwarikesh Sugar Industries was trading firm after the company posted net profit of Rs 46.82 crore in the fourth quarter ended March 31, down from Rs 52.82 crore posted in the same period of the last fiscal. Net profit in FY17 stood at Rs 158.47 crore, up 307 per cent from Rs 38.97 crore in FY16.

On the global front, Asian shares were trading mostly in green, amid political turmoil in Brazil. Indonesia’s central bank governor said its policy stance remained neutral and that it was monitoring global risks ranging from the big chance of a rate hike in the United States in June to tension in the Korean peninsula. At a policy meeting, Bank Indonesia kept its benchmark interest rate unchanged at 4.75 percent, saying its decision was consistent with its efforts to maintain stability at a time of recovery for Southeast Asia’s largest economy. Back home, the NSE Nifty and BSE Sensex were trading above the psychological 9,450 and 30,600 levels respectively. The market breadth on BSE was positive in the ratio of 1570:612, while 93 scrips remained unchanged.

The BSE Sensex is currently trading at 30634.70, up by 199.91 points or 0.66% after trading in a range of 30539.65 and 30712.35. There were 19 stocks advancing against 11 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.75%, while Small cap index was up by 1.02%.

The gaining sectoral indices on the BSE were FMCG up by 3.44%, Realty up by 1.88%, Power up by 1.55%, Telecom up by 1.25% and Metal up by 1.21%, while IT down by 0.77%, TECK down by 0.43% and Consumer Durables down by 0.06% were the only losing indices on BSE.

The top gainers on the Sensex were ITC up by 5.07%, Hindustan Unilever up by 2.39%, SBI up by 1.86%, Bharti Airtel up by 1.71% and Coal India up by 1.48%.

On the flip side, TCS down by 1.13%, Infosys down by 1.00%, Asian Paints down by 0.99%, Maruti Suzuki down by 0.95% and Wipro down by 0.94% were the top losers.

Meanwhile, on the day one of its crucial fourteenth meeting, the Goods and Services Tax (GST) Council, headed by Union Finance Minister Arun Jaitley, finalized tax rates on 1211 items, under the four-slab structure with essential items of daily use being kept in the lowest bracket of 5 percent. The most of the items will likely become cheaper as the new rates will be lower than the current effective levies. The Council in the opening session of the two-day meeting also approved rules for the rollout of the new indirect tax regime from July 1, 2017.

Out of 1211 items, GST rates on all except six categories have been decided. Under the new tax regime, rates will range from 5 to 28 percent, with 12 percent and 18 percent being the standard rates. Only 19 percent of goods will be taxed above 18 percent, while 81 percent of items will fall under below 18 percent GST rate slabs. Cereals and milk will be exempted from tax, while sugar, edible oil, normal tea and coffee (not instant tea or coffee) will attract a GST rate of 5 percent, down from the current effective rate of 4-6 percent. Coal will be taxed at 5 percent under GST, compared to a current effective rate of 11.7 percent, along with a levy of Rs 400 per tonne.

Common use products like hair oil, soaps and toothpaste will be charged with a single national sales tax or GST of 18 percent instead of present 22-24 percent tax incidence through a combination of central and state government levies. Prices of foodgrains, especially wheat and rice, will come down as they will be exempt from GST. Currently, some states levy Value Added Tax (VAT) on them. Aerated drinks and cars will be in 28 percent bracket. On top of the peak rate, small cars will attract a 1 percent cess, mid-sized cars will attract 3 percent and luxury cars 15 percent. ACs and refrigerators will fall in the 28 percent tax slab, while life saving drugs have been kept at 5 percent rate.

The panel will discuss tax rates for gold and some other items on May 19, 2017, and could meet one more time if necessary to decide rates on remaining items. The GST will be a national sales tax that will be levied on consumption of goods or use of services. It will replace 16 current levies - seven central taxes like excise duty and service tax and nine state taxes like VAT and entertainment tax - thereby creating India as one market with one tax rate. With the GST, India will join select league of nations with a goods and service tax.

The CNX Nifty is currently trading at 9483.35, up by 53.90 points or 0.57% after trading in a range of 9465.15 and 9505.75. There were 32 stocks advancing against 19 stocks declining on the index.

The top gainers on Nifty were ITC up by 5.15%, Bank of Baroda up by 2.72%, Yes Bank up by 2.57%, Grasim Industries up by 2.32% and Hindustan Unilever up by 2.10%.

On the flip side, Asian Paints down by 1.28%, TCS down by 1.20%, Wipro down by 1.18%, Eicher Motors down by 1.10% and Infosys down by 1.05% were the top losers.

The Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 3.23 points or 0.18% to 1,770.40, KOSPI Index increased 4.19 points or 0.18% to 2,291.01, Jakarta Composite increased 22.12 points or 0.39% to 5,667.57, Nikkei 225 increased 28.78 points or 0.15% to 19,582.64 and Hang Seng increased 82.54 points or 0.33% to 25,219.06.

On the other hand, Taiwan Weighted decreased 16.26 points or 0.16% to 9,953.19 and Shanghai Composite decreased 1.29 points or 0.04% to 3,088.85.