Benchmarks make cautious start ahead of RBI policy meet

Indian equity benchmarks have made a cautious start and are trading flat in early deals on Monday, as traders remained cautious ahead of the Reserve Bank of India’s (RBI) monetary policy committee (MPC) meeting, whose outcome will be known on Wednesday. Some concern came with terror attack in London, too dampened sentiments. Meanwhile, an Assocham-Thought Arbitrage Research Institute Paper has said that sectors such as construction and real estate, beauty and wellness, organised retail, transport and logistics hold the maximum job potential in India in the near future. However, traders were taking some sense of relief with a World Bank report that successful demonetisation will help in raising revenues on sustained basis as more and more people will come under the tax net.

On the global front, Asian counters were exhibiting mixed trend at this point of time with some indices trading in red, as the most recent US data is testing bets on improving global growth that has helped drive the value of equities worldwide. The US markets extended their gains in last session, overlooking a weaker than expected jobs data, as the World Bank forecasted a modest pickup in growth despite uncertainty about monetary policy and concern among bond traders that inflation is waning.

Back home, stocks related to software pack edged higher, as the Union IT minister Ravi Shankar Prasad dismissing as 'completely wrong' the reports of a downturn in the Indian IT sector has said a good number of people will get jobs in the current fiscal. The IT minister said firms like TCS and Infosys have said they would recruit thousands of professionals in the current fiscal. Stocks related to Gems and Jewellary sector remained buzzing, as following the 15th meeting of the GST Council meeting, GST rates for a number of commonly-used items, including footwear, apparels and gold were announced. Gold, gold jewellery, silver and diamond will be taxed at 3 percent. Gold currently attracts 1 percent excise duty and 1 percent VAT (more for some states), equaling to 2 percent.

The BSE Sensex is currently trading at 31271.41, down by 1.88 points or 0.01% after trading in a range of 31198.22 and 31275.35. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.53%, while Small cap index was up by 0.70%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 4.17%, Realty up by 1.30%, Consumer Disc up by 1.11%, Telecom up by 0.68% and Metal up by 0.59%, while FMCG down by 0.19% was the lone losing index on BSE.

The top gainers on the Sensex were Bajaj Auto up by 2.25%, Cipla up by 1.19%, Tata Steel up by 1.04%, Sun Pharma up by 0.82% and Axis Bank up by 0.77%. On the flip side, ITC down by 1.07%, Coal India down by 0.73%, Lupin down by 0.70%, HDFC down by 0.63% and Infosys down by 0.37% were the top losers.

Meanwhile, with less than a month to go for the roll out of the new indirect tax regime, the all powerful GST Council has cleared the pending rules, including transition provisions and filing of returns, in the process addressing some concerns of the industry over the earlier drafts, with all states agreeing to July 1 roll out of the Goods and Services Tax (GST). Besides, the GST Council, in its fifteenth meeting, has also fixed the GST rates for a clutch of items, including gold, diamonds, textiles and garments, footwear and biscuits, almost completing the exercise of rate fitment.

Federal indirect tax body has decided to tax Gold, silver and jewellery made of these metals at 3%. Currently, apart from 1% excise and 1% or slightly higher tax on sales by states, gold imports attract basic customs duty of 10%. BCD will remain in the GST regime, while the excise duty and VAT will be subsumed in it. It also decided to tax rough diamond at 0.25% and placed agriculture equipment at two slabs of 5% and 12%.

Packaged and branded food items will attract GST at 5%, tendu leaves at 18% and bidi at the highest rate of 28%. Unlike cigarettes, there will be no cess on bidi. Further, biscuits will be taxed at a flat rate of 18%. Currently, biscuits costing less than Rs 100/kg attract an average tax of 20.6%, while those above this price attract 23.11%. Both have been fitted in the nearest tax slab of 18%. Footwear costing up to Rs 500 currently attracts 9.5% tax, and in GST it would be taxed at 5%. Rest are taxed between 23.1-29.58%, which in GST regime, would be levied 18% tax.

In the textiles category, silk and jute fibre have been exempted, while cotton and natural fibre and all kinds of yarns will be levied a 5% GST. However, man-made fibre and yarn will attract a 18% tax rate. All categories of fabric will attract a 5% rate. Man-made apparel up to Rs 1,000 will attract a 5% tax, lower than the existing 7%. Those costing above Rs 1,000, will continue to attract 12%. Moreover, solar panels will be taxed at 5%, against 18% specified earlier.

The council also decided to enhance the deemed credit for transition stocks in case of items that attract GST at 18% or 28% to 60% of the tax liability, while retaining such credit at 40% for others, addressing a major concern of the industries, including firms manufacturing automobiles, FMCGs, white goods and aerated beverages. Besides, the GST Council will meet again on June 11, 2017, to consider industry requests for concessions and any other pending issue.

The CNX Nifty is currently trading at 9665.60, up by 12.10 points or 0.13% after trading in a range of 9640.70 and 9665.70. There were 35 stocks advancing against 16 stocks declining on the index.

The top gainers on Nifty were Bajaj Auto up by 2.17%, Indiabulls Housing up by 1.50%, Bharti Infratel up by 1.47%, BPCL up by 1.45% and Yes Bank up by 1.36%. On the flip side, ITC down by 1.07%, Lupin down by 0.87%, Coal India down by 0.73%, Infosys down by 0.38% and HDFC down by 0.32% were the top losers.

Asian markets were trading mixed; KOSPI Index rose 2.18 points or 0.09% to 2,373.90, FTSE Bursa Malaysia KLCI increased 8.19 points or 0.46% to 1,785.14, Jakarta Composite gained 15.7 points or 0.27% to 5,758.15 and Taiwan Weighted was up by 39.39 points or 0.39% to 10,197.54.

On the flip side, Hang Seng decreased 85.84 points or 0.33% to 25,838.21, Shanghai Composite shed 14.53 points or 0.47% to 3,091.01 and Nikkei 225 was down by 6.39 points or 0.03% to 20,170.89.