Benchmarks continue weak trade; Nifty below 9650 mark

Indian equity benchmarks continued their weak trade in late morning session, on account of selling in frontline blue chip counters. Investors started cutting down their bets amid continued capital outflows by foreign funds and a weak trend in Asian markets. The rupee opened lower against dollar on account of buying of American currency by banks and importers. Foreign portfolio investors sold shares worth Rs 171.55 crore in the equity markets on Tuesday with gross purchases and gross sales of Rs 3886.89 crore and Rs 4058.44 crore, respectively. The sentiments were under pressure with the inclusion of Chinese mainland stocks to the MSCI index, which could lead to hundreds of billions of dollars worth of share purchases, shrinking shares of other emerging markets, including India.

Traders were seen piling up position in Realty, Capital Goods and Telecom stocks, while selling was witnessed in Metal, Oil & Gas and IT stocks. In scrip specific development, Thomas Cook (India) was trading in green after its wholly owned subsidiary - Travel Corporation (India), successfully subscribed to 49% of equity share capital of TCI-Go Vacation India, a joint venture Company with DER Touristik Group. Shares of aviation companies like InterGlobe Aviation (IndiGo), Jet airways and SpiceJet were trading in green taking cues from the benchmark Brent which hit a fresh seven-month low of $45.85 a barrel - a level not seen since November 18 last year.

On the global front, Asian shares were trading mostly in red following MSCI’s decision to include Chinese A-shares. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 9,650 and 31,300 levels respectively. The market breadth on BSE was positive in the ratio of 1079:1052, while 126 scrips remained unchanged.

The BSE Sensex is currently trading at 31215.45, down by 82.08 points or 0.26% after trading in a range of 31193.61 and 31305.60. There were 8 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.04%, while Small cap index was up by 0.31%.

The top gaining sectoral indices on the BSE were Realty up by 1.13%, Capital Goods up by 0.56%, Telecom up by 0.28%, Industrials up by 0.14% and FMCG up by 0.12%, while Metal down by 0.78%, Oil & Gas down by 0.66%, IT down by 0.61%, Auto down by 0.59% and TECK down by 0.48% were the losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 0.94%, SBI up by 0.57%, Reliance Industries up by 0.41%, Sun Pharma up by 0.31% and Bharti Airtel up by 0.26%.

On the flip side, ONGC down by 1.96%, Cipla down by 1.57%, Lupin down by 1.35%, TCS down by 1.30% and Tata Motors down by 1.13% were the top losers.

Meanwhile, with Goods and services tax (GST) coming into effect from July 01, Domestic rating agency, ICRA in its latest report has said that the impact of GST is likely to be neutral to positive for most of the segments in the textile industry as compared to current domestic indirect tax regime.

As per the report, the effective tax incidence on cotton and man-made fibre (MMF) or blended textiles under the existing tax regime is in the range of 5-7 percent and 11-14 percent, respectively. Besides excise duty, it noted that this captures the impact of other multiple levies such as Value Added Tax (VAT), Central Sales Tax (CST) and entry tax or octroi. Considering that the GST rates announced for these textile categories are more or less in line with the existing effective tax rates, ICRA does not envisage any impact on these product categories. However, it said that the rates announced are expected to be positive for wool or silk-based textiles, which will be taxed at a lower rate of 5 percent compared to the prevailing tax of 8-10 percent.

The rating firm pointed out that fabric manufacturers, who operate under the composition scheme of taxation for which the Input Tax Credit (ITC) is not available will face challenges as the apparel manufactures will prefer to deal with GST-compliant fabric suppliers to avail ITC. Therefore, it noted that this will incentivise the fabric manufactures to operate under the purview of GST. It added that with the new tax regime applied on cotton yarn as well, the incentive for fabric manufacturers to not avail of the ITC will also fall, since doing so would reduce the fabric- manufacturer’s competitiveness.

The CNX Nifty is currently trading at 9617.30, down by 36.20 points or 0.37% after trading in a range of 9609.35 and 9650.45. There were 10 stocks advancing against 41 stocks declining on the index.

The top gainers on Nifty were Bank of Baroda up by 1.25%, Larsen & Toubro up by 0.89%, Hindustan Unilever up by 0.63%, SBI up by 0.55% and Reliance Industries up by 0.35%.

On the flip side, ONGC down by 2.40%, Cipla down by 2.09%, Eicher Motors down by 1.77%, Bosch down by 1.71% and Lupin down by 1.56% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 100.41 points or 0.39% to 25,742.63, Nikkei 225 decreased 76.88 points or 0.38% to 20,153.53, KOSPI Index decreased 13.24 points or 0.56% to 2,355.99 and FTSE Bursa Malaysia KLCI decreased 3.78 points or 0.21% to 1,776.93.

On the other hand, Jakarta Composite increased 0.51 points or 0.01% to 5,792.42, Shanghai Composite increased 1.87 points or 0.06% to 3,141.88 and Taiwan Weighted increased 47.61 points or 0.46% to 10,372.07.