Benchmarks add strength to trade in green

Indian equity benchmarks added strength and started trading above neutral line in late morning session, on account of buying in front line blue chip counters. The rupee opened higher against the US dollar on account of selling of American currency by exporters. With the major part of the earning season being over, RBI’s monetary policy review, key macroeconomic data and progress of monsoon rains would influence market sentiment this week. RBI is likely to maintain status quo at its monetary policy review on Wednesday as it would like to gauge the impact of GST rollout on inflation. Traders were taking support from 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. 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.

Meanwhile, if the latest ASSOCHAM report is to be believed, the era of jobless growths is coming to an end and sectors like real estate, retail, wellness and transport and logistics may create the most jobs in the near future. The Associated Chambers of Commerce and Industry of India (ASSOCHAM)-Thought Arbitrage Research Institute joint report also said India’s information technology and IT-enabled services (ITeS) sector may add at best one million jobs in the next five years. The upside was capped after a foreign brokerage enlightened that India’s economic growth is expected to remain flat at 7.1 per cent in current fiscal as investment is still weak and government spending might not be as high given the fiscal consolidation. The GDP growth momentum is slowing since mid-2016 and this trend is expected to continue going forward. India has been ranked 45th, down four notches from last year, in terms of competitiveness in the annual rankings compiled by IMD which saw Hong Kong topping the list.

Traders were seen piling up position in Consumer Durables, Realty and Consumer Disc stocks, while selling was witnessed in FMCG and IT stocks. In scrip specific development, logistics firm North Eastern Carrying Corporation (NECC) was trading firm as it is embarking on an expansion drive with plans to double its reach to 500 locations across India in the next three to four years to tap opportunities after GST implementation. The company, which has a strong presence in East and North East, is gearing up to penetrate deeper in the region, while seeking to strengthen presence in South.

On the global front, Asian shares were trading mostly in green. 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. Back home, the NSE Nifty and BSE Sensex were trading above the psychological 9,650 and 31,200 levels respectively. The market breadth on BSE was positive in the ratio of 1371:820, while 137 scrips remained unchanged.

The BSE Sensex is currently trading at 31282.24, up by 8.95 points or 0.03% after trading in a range of 31198.22 and 31292.63. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.32%, while Small cap index was up by 0.61%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 5.09%, Realty up by 1.57%, Consumer Disc up by 1.05%, Telecom up by 0.96% and Capital Goods up by 0.58%, while FMCG down by 0.20% and IT down by 0.08% were the only losing indices on BSE.

The top gainers on the Sensex were Bajaj Auto up by 2.45%, Adani Ports & Special Economic Zone up by 1.61%, ONGC up by 1.50%, Tata Steel up by 1.28% and Hindustan Unilever up by 0.88%.

On the flip side, ITC down by 1.08%, Lupin down by 0.96%, Coal India down by 0.95%, Power Grid down by 0.53% and Infosys down by 0.48% 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 9667.70, up by 14.20 points or 0.15% after trading in a range of 9640.70 and 9670.75. There were 33 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were Bajaj Auto up by 2.33%, Bharti Infratel up by 1.71%, Yes Bank up by 1.59%, Adani Ports & Special Economic Zone up by 1.58% and ONGC up by 1.49%.

On the flip side, ITC down by 1.07%, Lupin down by 1.06%, Coal India down by 0.93%, Ultratech Cement down by 0.70% and Power Grid down by 0.63% were the top losers.

The Asian markets were trading mostly in green; KOSPI Index increased 0.04 points to 2,371.76, FTSE Bursa Malaysia KLCI increased 8.25 points or 0.46% to 1,785.20, Jakarta Composite increased 10.93 points or 0.19% to 5,753.38, Nikkei 225 increased 29.18 points or 0.14% to 20,206.46 and Taiwan Weighted increased 42.4 points or 0.42% to 10,200.55.

On the other hand, Hang Seng decreased 67.23 points or 0.26% to 25,856.82 and Shanghai Composite decreased 15.21 points or 0.49% to 3,090.33.