Post Session: Quick Review

Indian equity benchmarks traded in the positive territory for most part of the day and ended the session with modest gains. With major part of the earning season being over, RBI’s monetary policy review, key macroeconomic data and progress of monsoon rains would influence market sentiments this week. RBI is likely to maintain status quo at its monetary policy review as it would like to gauge the impact of GST rollout on inflation. The second bi-monthly monetary policy meeting will be held on June 6 and 7 with the RBI making the announcement on June 7, Wednesday. The equity benchmarks made a cautious start and traded flat in early deals as traders remained cautious ahead of the RBI meet. Traders took support from the GST Council meet which on Saturday cleared the pending rules and decided the rates of tax and cess on the remaining items. Now, the new indirect tax regime is most likely to be rolled out on July 1, despite reservations voiced by West Bengal. All other states have agreed to the timeline. Separately, the 2017 Global Retail Development Index (GRDI), now in its 16th edition, enlightened that India has surpassed China to secure the top position among 30 developing countries on ease of doing business, according to a study that cited India’s rapidly expanding economy, relaxation of FDI rules and a consumption boom as the key drivers.

Some support also came with World Bank report which highlighted that successful demonetization will help in raising revenues on sustained basis as more and more people will come under the tax net. During 2016-17, India generated additional tax revenues as unreported cash identified both through the amnesty scheme and demonetisation were brought under the tax net. The World Bank has stated that even if the initial impact of demonetization on banks was negative, the longer-term impact may be more positive if the new steady-state level of deposits is higher and usage of electronic payments increases. FDI inflows into the services sector rose by about 26% to $8.68 billion in 2016- 17 with the government taking steps to improve the ease of doing business and attracting foreign investments. According to data of the Department of Industrial Policy and Promotion (DIPP), the sector, which includes banking, insurance, outsourcing, R&D, courier and technology testing, has received foreign direct investment (FDI) worth $6.89 billion in 2015-16.

On the global front, Asian markets closed mixed. Activity in Japan’s services sector expanded at the fastest pace in almost two years in May, a private survey showed, further evidence that demand in the world’s third-largest economy is picking up. Bourses in Europe were trading in red as investors were reacting to the terrorist attack in London over the weekend, just a few days ahead of a general election. Investors are also eyeing an upcoming monetary policy meeting from the European Central Bank (ECB). Activity in the UK service sector fell more than expected in May, pulling back from what had been a high for the year in the previous month and dampening optimism over the British economy as the sector makes up approximately 80% of gross domestic product.

Back home, majority of jewellery companies stocks closed in green following the government’s announcement of GST rates on gold. The GST Council on Saturday announced that the rate on gold and gold jewellery would be at 3%, while the import duty of 10%, which will be over and above the 3%, remains unchanged. Currently, tax on gold and jewellery is at 2% and the current GST rate is slightly higher at 3%, but lower than the 5% rate that was expected.

The BSE Sensex ended at 31316.33, up by 43.04 points or 0.14% after trading in a range of 31198.22 and 31355.42. There were 16 stocks advancing against 14 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 0.08%, while Small cap index was up by 0.65%. (Provisional)

The top gaining sectoral indices on the BSE were Consumer Durables up by 5.71%, Realty up by 1.08%, Consumer Disc up by 1.00%, Capital Goods up by 0.80% and Industrials up by 0.47%, while Metal down by 0.60%, Utilities down by 0.26%, Healthcare down by 0.14%, Basic Materials down by 0.07% and PSU down by 0.06% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were TCS up by 2.15%, Bajaj Auto up by 1.89%, Cipla up by 1.30%, Adani Ports & Special Economic Zone up by 1.25% and Hindustan Unilever up by 1.13%. (Provisional)

On the flip side, Coal India down by 1.79%, GAIL India down by 1.22%, Infosys down by 0.99%, Lupin down by 0.74% and Dr. Reddy’s Lab down by 0.64% were the top losers. (Provisional)

Meanwhile, pointing to the fastest increase in output in the current four-month sequence of expansion, India's services sector activity grew in May. The seasonally adjusted Nikkei Business Activity index surged to 52.2 in May from 50.2 in April, marking a fourth month above the 50-level that separates growth from contraction. Output at goods producers rose at a softer rate than in April, but one that outstripped that seen in the service economy. The seasonally adjusted Nikkei India Composite PMI Output Index which measures both manufacturing and services also increased to 52.5 in May from 51.3 in April to reach at a seven month high.

The survey results stated that service providers took on extra staff in May in order to cope with greater workloads, noting that the job creation accelerated in May month to near four year high. Supporting the pick-up in services activity growth was a quicker rise in new business inflows. However, factory jobs witnessed a fall in the latest month. The survey further stated that the stronger upturn in services new work helped to offset the slowdown in growth of manufacturing orders and new work across the private sector economy in May.

On the cost front, the report said that input costs and output charges increased at softer rates which were broadly negligible in the context of historical PMI data. Outstanding business volumes at service providers rose further in May, while level of unfinished work held by manufacturing firms also expanded at a modest, though quicker, pace. The report further said that business sentiment weakened on the back of growing concerns regarding competitive pressure and added that outstanding business volumes at service providers rose further in May, taking the current sequence of continuous accumulation to one year.

The CNX Nifty ended at 9676.15, up by 22.65 points or 0.23% after trading in a range of 9640.70 and 9687.20. There were 32 stocks advancing against 19 stocks declining on the index. (Provisional)

The top gainers on Nifty were Indiabulls Housing up by 3.46%, Yes Bank up by 2.58%, TCS up by 1.99%, Indian Oil up by 1.74% and Bharti Infratel up by 1.57%. (Provisional)

On the flip side, Coal India down by 1.58%, Ultratech Cement down by 1.43%, GAIL India down by 1.11%, Infosys down by 1.08% and Lupin down by 0.96% were the top losers. (Provisional)

The European markets were trading in red; UK’s FTSE 100 decreased 19.67 points or 0.26% to 7,527.96 and France’s CAC decreased 28.26 points or 0.53% to 5,315.15.

Asian equity markets made a mixed closing on Monday after a US jobs report failed to meet expectations and Islamic terrorism once again stuck the United Kingdom, killing at least seven people and injuring 48 more. Meanwhile, Oil prices rose on the back of news that Saudi Arabia, Bahrain, the United Arab Emirates and Egypt had severed diplomatic ties with Qatar. Saudi Arabia said it had cut ties with Qatar due to reasons related to terrorism. Chinese shares ended lower, with financials and healthcare stocks leading losses, after the China Securities Regulatory Commission allowed four companies to rise up to 1.5 billion yuan (about $220 million) via initial public offerings, despite the positive read from the May Caixin services PMI which rose to 52.8 from 51.5 in April. Japanese shares ended flat, keeping close to a 22-month high scaled at the end of last week as the yen's rise against the dollar stalled.