Post Session: Quick Review

Paring all of their initial gains, Indian equity markets ended the session marginally in red with cut of around one tenth of a percent. The markets remained in consolidation mode with breath in favor of declines. The Midcap index closed mildly higher, while Banks failed to continue yesterday’s gains. The equity benchmarks made a positive start in early deals after a foreign brokerage firm enlightened that there were fewer concerns of the Goods and Services Tax (GST) being inflationary in India as most essential goods and services have been exempted from the new regime. The reform is set to be implemented from July 1 and will subsume most of other levies like exercise and service tax, and bring the country under a single taxation regime. In its economic report it highlighted that the tax incidence is likely to rise mainly on selected service sector categories after the GST is implemented. Meanwhile, the credit rating agency, Fitch Ratings in its latest report ‘Global Economic Outlook’ forecasted the Gross Domestic Product (GDP) of the country to grow at 7.4 per cent this year and 7.6 per cent in the next fiscal year buoyed by rising public spending on infrastructure. The rating agency added that the investment in India is also expected to witness gradual rise owing to transmission of supportive monetary policy along with the government’s various structural reforms. However, cautiousness crept in after Fitch stated that demonetization of old Rs 500 and 1,000 notes had a material impact on spending as reflected in significant slowing of GDP growth in January-March and warned that the ongoing steep decline in investment could spell risks to growth potential. Finance Minister Arun Jaitley confirmed that GST will be officially rolled out on the midnight of June 30. He said in the short-term there will be some challenges, but it will have positive impact on GDP.

On the global front, Asian markets closed mixed amid speculation on whether China would be added to the MSCI emerging markets index on the fourth try. Confidence among Japanese manufacturers bounced in June to match a decade-high level recorded in April and is expected to rise for several months, providing more evidence of economic recovery. The European markets were trading in green with German stocks hitting record highs as the euro zone’s leading economy received an upgrade to its growth outlook and market players sold off the pound after digesting Bank of England (BoE) governor Mark Carney’s dovish comments.

Back home, shares of aviation companies like InterGlobe Aviation (IndiGo), Jet airways and SpiceJet closed in green on report that domestic air traffic grew at 17.36 per cent with airlines ferrying 101.74 lakh passengers in May as compared to 86.69 lakh passengers in the same month last year. Shares of select Non-Banking Financial Companies (NBFCs) closed in green reacting positively to the farm loan waiver cap of Rs 1 lakh in Maharashtra and Rs 2 lakh in Punjab. Lanco Infratech closed at lower circuit limit after the power and roads builder, became the first company to face bankruptcy proceedings among the dozen identified by the regulator as IDBI Bank has decided to recover its dues by taking the resolution to insolvency courts.

The BSE Sensex ended at 31280.50, down by 31.07 points or 0.10% after trading in a range of 31261.49 and 31392.53. There were 16 stocks advancing against 15 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 0.20%, while Small cap index was up by 0.17%. (Provisional)

The top gaining sectoral indices on the BSE were Realty up by 1.41%, Consumer Durables up by 1.03%, IT up by 0.98%, TECK up by 0.73% and Industrials up by 0.64%, while Utilities down by 0.32%, Consumer Disc down by 0.29%, Power down by 0.23%, Bankex down by 0.19% and Auto down by 0.10% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Tata Motors up by 3.02%, Tata Motors - DVR up by 1.71%, Infosys up by 1.57%, ONGC up by 1.36% and Wipro up by 1.14%. (Provisional)

On the flip side, Power Grid down by 2.07%, Lupin down by 1.57%, Axis Bank down by 1.38%, HDFC down by 1.30% and NTPC down by 1.15% were the top losers. (Provisional)

Meanwhile, the capital market regulator, Securities and Exchange Board of India (SEBI) may ease the acquisition rules to allow investors to buy distressed assets from banks. The market regulator in its upcoming board meeting is expected to come up with an easy pricing formula for an open offer to public shareholders and lock-in requirements for acquirers of distressed companies, based on the demand for extension of these exemptions. At present, such relaxations are given only to banks and the regulator has been granting exemptions to banks acquiring the stock of listed distressed companies. RBI too has been in consultation with Sebi on dealing with distressed companies.

SEBI has been regularly suggesting various measures to tackle the problem of rising bad loans and has received feedback that such exemptions need to be extended to other prospective buyers as well. It recently made several relaxations to the securities regulations to allow a more efficient corporate debt restructuring including easier preferential allotments norms, crackdown on wilful defaulters and open offer relaxation.

The government and regulators have taken several measures to tackle the banking sector nonperforming asset (NPA) problem. Banks have been advised by RBI to reduce NPAs and initiate stringent actions to recover dues from borrowers. Sebi board in its meeting is also likely to tighten offshore derivatives instruments (ODI) or participatory notes (p-notes) regulations.

The CNX Nifty ended at 9649.95, down by 7.60 points or 0.08% after trading in a range of 9643.75 and 9676.50. There were 24 stocks advancing against 27 stocks declining on the index. (Provisional)

The top gainers on Nifty were Tata Power up by 5.51%, Tata Motors up by 3.14%, Tata Motors - DVR up by 1.70%, ONGC up by 1.66% and Infosys up by 1.61%. (Provisional)

On the flip side, Power Grid down by 2.05%, Eicher Motors down by 1.85%, Lupin down by 1.74%, Axis Bank down by 1.66% and Bosch down by 1.55% were the top losers. (Provisional)

The European markets were trading mostly in green; UK’s FTSE 100 increased 9.84 points or 0.13% to 7,533.65, Germany’s DAX increased 42.16 points or 0.33% to 12,931.11 and France’s CAC increased 21.2 points or 0.4% to 5,331.92.

Asian equity markets made a mixed closing on Tuesday, with Japanese markets leading regional gains, as comments from an influential Federal Reserve official that rising wages would boost US inflation helped lift the dollar to a three-week high against the Japanese yen. While another record close on Wall Street helped underpin investor sentiment, falling oil prices and uncertainty ahead of a decision by US index provider MSCI on whether to include China A-shares in its Emerging Market Index served to keep the underlying mood somewhat cautious.