Post Session: Quick Review

Indian equity markets traded in red for most part of the day and ended the session in red with Nifty closing lower for sixth straight session. Weakness in lenders on worries about provisioning for defaulted loans continued, while concerns of bloated valuations following a record-setting rally dampened risk appetite. Also, investors remained cautious ahead of GST rollout on July 1. The equity benchmarks traded in red in early deals with Finance Minister Arun Jaitley’s statement that people may have to face some difficulty initially during the Goods and Services Tax (GST) is rolled out, but in the long run the new indirect tax regime would help cut tax evasion and check price rise. He also said that the GST Council will look at bringing real estate within the GST net by next year and revisit taxing of petroleum products under the new regime in 1-2 years. Some pressure also crept in after global credit rating agency Fitch maintained its negative outlook on Indian banks because of erosion of the sector’s core capitalization, even as they enter the final phase of Basel III migration. This is based on its assessment that the sector’s core capitalization, which has been eroded in the last few years, will remain challenged unless it is boosted by adequate capital support from the authorities or equity raising from capital markets. Maintaining its negative outlook on Indian banks, Fitch Ratings has affirmed the Long-Term Issuer Default Ratings (IDRs) of eight Indian banks.

Meanwhile, West Bengal Chief Minister Mamata Banerjee raised her concerns over implementation of GST. She took a jibe at the Centre and said that GST is another epic blunder after demonetization. She called the government’s move of rolling out GST on July 1 a disaster. Banerjee believes that small business entities are not yet ready with the basic requirement like invoice and accounting system under GST. The market may remain volatile this week as traders may roll over positions in the Futures & Options (F&O) segment from the near month i.e. June 2017 series to next month i.e. July 2017 series. The near month June 2017 derivatives contracts will expire on Thursday i.e. June 29, 2017.

On the global front, Asian markets closed in red, knocked hard in the wake of a delay to a US healthcare reform vote. Japan’s Nikkei share average slipped facing headwinds from the dollar’s reversal of its rise against the yen. China’s economy continued to improve in the second quarter, with corporate profits rising and hiring up, a private survey showed, but it suggested the Asian giant may have to brace for tougher times ahead even though firms have been able to weather a tighter financing environment. European markets were trading in red as technology stocks slumped. The euro hit a 1-year high on Wednesday and German 10-year Bund yields continued to rise after doubling the previous day, as bets grew that the European Central Bank is readying to scale back its 2-trillion-euro stimulus programme.

The BSE Sensex ended at 30827.52, down by 130.73 points or 0.42% after trading in a range of 30798.70 and 31000.48. 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 0.32%, while Small cap index was up by 0.15%. (Provisional)

The top gaining sectoral indices on the BSE were Metal up by 1.69%, Telecom up by 1.39%, Basic Materials up by 0.79%, Realty up by 0.77% and Power up by 0.71%, while Energy down by 1.34%, Consumer Durables down by 1.10%, Oil & Gas down by 0.83%, FMCG down by 0.57% and Consumer Disc down by 0.22% were the top losing indices on BSE. (Provisional)

The top gainers on the Sensex were Tata Steel up by 1.98%, Bharti Airtel up by 1.84%, Wipro up by 1.17%, Power Grid up by 0.93% and ICICI Bank up by 0.89%. (Provisional)

On the flip side, Reliance Industries down by 2.52%, Asian Paints down by 2.12%, HDFC down by 1.89%, ONGC down by 1.47% and ITC down by 1.09% were the top losers. (Provisional)

Meanwhile, construction equipment industry body, Indian Construction Equipment Manufactures’ Association (ICEMA) has said that higher tax rate and cheaper imports under the Goods and Services Tax (GST) regime will affect sales and so has slashed the industry’s growth forecast for the current financial year to 5 per cent from 20 per cent. It said that the cheaper import of construction equipment will hurt domestic industry in the long run and there will be cash flow issues in the short term. Besides, ICEMA forecasted that sales of the industry likely to be affected by 10-15 per cent.

ICEMA further said that the allowance given by the government to take tax credit on imported construction equipment under the new tax regime, will lead to reduction in the landed cost and as a result imported construction equipment will become much cheaper and domestic manufacturers will struggle. The industry body hopes that the government will take a relook at the GST rate for the construction equipment industry keeping in mind the interest of domestic manufacturers.

As per ICEMA, under the new tax regime 80 per cent of construction equipment machinery has been put under 28 per cent tax slab, while the remaining will be taxed at 18 per cent. At present, around 50 per cent of the total construction equipment has a tax incidence of 15 per cent, while around 30 per cent has 18 per cent rate, and the remaining 20 per cent around 28 per cent.

The CNX Nifty ended at 9492.60, down by 18.80 points or 0.20% after trading in a range of 9474.35 and 9522.50. There were 28 stocks advancing against 23 stocks declining on the index. (Provisional)

The top gainers on Nifty were Tech Mahindra up by 3.13%, Yes Bank up by 2.44%, Ambuja Cement up by 2.26%, Tata Steel up by 2.16% and Vedanta up by 2.11%. (Provisional)

On the flip side, Reliance Industries down by 2.60%, Asian Paints down by 2.13%, HDFC down by 1.69%, Zee Entertainment down by 1.57% and ONGC down by 1.38% were the top losers. (Provisional)

The European markets were trading in red; UK’s FTSE 100 decreased 0.44 points or 0.01% to 7,433.92, Germany’s DAX decreased 60.02 points or 0.47% to 12,611.00 and France’s CAC decreased 15.08 points or 0.29% to 5,243.50.

Asian equity markets ended in red on Wednesday as the US Senate's move to delay a vote on healthcare bill until after next week's July 4 holiday triggered concerns whether the Trump administration will be able to deliver pledged tax cuts and infrastructure spending. The euro hit a one-year high as digested hawkish comments from ECB President Mario Draghi that the central bank could trim its stimulus this year. The dollar was little changed versus the yen while crude prices were lower ahead of weekly inventory data from the US due later in the day. Japanese shares fell, dragged down by tech shares, after EU regulators fined Google a record 2.4 billion euros ($2.7 billion) for violating antitrust rules and a massive global cyber-attack hit IT systems across multiple geographies and business units. On the economic front, Japan's small business confidence improved for the second straight month in June, though slightly, survey data from Shoko Chukin Bank showed today. Further, Chinese shares ended lower as comments by Premier Li Keqiang raised concerns over an economic slowdown and regulatory tightening. The Indonesian market remained closed for the Eid-ul-Fitr holiday.