Benchmarks continue weak trade in late morning session

Indian equity benchmarks continued their weak trade in late morning session on account of selling in front line blue chip counters, taking cues from regional counterparts. The rupee opened lower against dollar on account of fresh demand for the US currency from importers and banks amid cautious global sentiment. Foreign Portfolio Investors turned net sellers in domestic equity markets on Friday as they withdrew Rs 100 crore on net basis from stocks, as per provisional exchange data.  The sentiments were under pressure as State Bank of India (SBI) expressed concern that demonetization, announced in November 2016, may continue to result in slowing down of the economy, and adversely affect its business. The long-term impact of this move on the Indian economy and the banking sector is uncertain. SBI’s research report Ecowrap pointed out the dangers of targeting food inflation consistently at very low levels as a part of the overall mandate for inflation targeting without adequate agricultural reforms. Food prices are now lower than the average of the last three years. The report highlighted that the forecast of normal monsoon this year is good news for food inflation, but low prices have their own dangers in the form of rural distress without agricultural reforms.

Meanwhile, Maharashtra is the second BJP government governed state after Uttar Pradesh to have announced a farm loan waiver. While the farm loan waiver by Maharashtra is worth Rs 30,000 crore, that by UP had been worth Rs 36,359 crore. Farmers from other states such as Madhya Pradesh and Tamil Nadu are also demanding farm loan waiver. The loan waivers affect state fiscal and ‘impact the credit discipline’ among borrowers. A day after UP government had announced a waiver, governor of the Reserve Bank of India (RBI) Urjit Patel, had denounced it, saying it undermines an honest credit culture and impacts credit discipline. Similarly, SBI chairman Arundhati Bhattacharya has said credit discipline breaks when farm loans are waived off. Traders were seen piling up position in Realty, Metal and Healthcare stocks, while selling was witnessed in IT, Capital Goods and TECK stocks. In scrip specific development, Amtek Auto was trading in red after the debt ridden auto component maker reported a net loss of Rs 307.57 crore for the quarter ended March 31, 2017. The company had posted a loss of Rs 563 crore in the same quarter in the previous fiscal.

On the global front, Asian shares were trading mostly in red, as central bank meetings ahead and uncertainty over the chances for a coalition government in Britain turned investors cautious. In a report, Economic and Social Research Institute said that Japan’s Core Machinery Orders fell to -3.1%, from 1.4% in the preceding month. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 9,650 and 31,200 levels respectively. The market breadth on BSE was negative in the ratio of 965:1226, while 119 scrips remained unchanged.

The BSE Sensex is currently trading at 31132.97, down by 129.09 points or 0.41% after trading in a range of 31070.65 and 31225.43. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.14%, while Small cap index was down by 0.09%.

The top gaining sectoral indices on the BSE were Realty up by 0.90%, Metal up by 0.48%, Healthcare up by 0.39%, Telecom up by 0.19% and Consumer Disc up by 0.15%, while IT down by 0.84%, Capital Goods down by 0.78%, TECK down by 0.66%, Industrials down by 0.58% and Bankex down by 0.52% were the losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 1.33%, Mahindra & Mahindra up by 1.26%, GAIL India up by 1.22%, Tata Steel up by 0.75% and ONGC up by 0.47%.

On the flip side, Wipro down by 2.75%, Larsen & Toubro down by 1.42%, Adani Ports & Special Economic Zone down by 1.20%, Reliance Industries down by 0.95% and SBI down by 0.95% were the top losers.

Meanwhile, in order to ensure smooth transition into the new tax regime, the Goods and Services Tax (GST) Council has constituted 18 sectoral groups to interact with the sectors like telecom, banking and export and sort out their issues in a time-bound manner. The other sectors which would be looked into by the group include IT and ITes, textiles, gems and jewellery, food processing, e-commerce, oil and gas, pharma and MSME.

The Council in its fourteenth meeting had decided to set up these sectoral groups to better understand industry concerns as India moves towards the GST, which will subsume 16 different taxes including excise, service tax, VAT and other local levies. The groups formed, represent various sectors of the economy and contain senior officers of the Centre and the States to ensure smooth implementation of GST by giving a timely response to the issues and problems of their respective sector.

The sectoral groups ensure to interact and examine representations received from trade and industry associations/bodies of their respective sector, highlight specific issues for the smooth transition of the respective sector to the GST regime and prepare sector specific draft guidance.

As per the Finance Ministry statement, ‘concerned industry groups/associations or even individual industry representatives may approach the respective sectoral group officers with their problems relating to GST implementation who, in turn, will try to guide and help them in resolving the same’. It also said that this exercise will help in dealing with most of the sectoral problems and issues at the local/regional level. The new levy kicks in from July 1 and the government is hopeful that the sectoral groups will help in dealing with most of the issues at the local and regional levels.

The CNX Nifty is currently trading at 9625.30, down by 42.95 points or 0.44% after trading in a range of 9606.40 and 9647.05. There were 19 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were Sun Pharma up by 1.35%, Mahindra & Mahindra up by 1.21%, GAIL India up by 1.15%, Vedanta up by 0.76% and Tata Steel up by 0.70%.

On the flip side, Wipro down by 2.83%, Bank of Baroda down by 2.13%, Larsen & Toubro down by 1.41%, Adani Ports & Special Economic Zone down by 1.24% and Tata Motors - DVR down by 1.19% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 319.7 points or 1.23% to 25,710.59, Nikkei 225 decreased 111.75 points or 0.56% to 19,901.51, Taiwan Weighted decreased 72.22 points or 0.71% to 10,127.43, KOSPI Index decreased 25.07 points or 1.05% to 2,356.62 and Shanghai Composite decreased 14.77 points or 0.47% to 3,143.63.

On the other hand, Jakarta Composite increased 32.09 points or 0.57% to 5,707.61.

Kuala Lumpur Stock Exchange is closed on account of National holiday.