Benchmarks make soft start on feeble global cues

Pressurized by feeble global cues, Indian equity benchmarks have made a soft start and are trading in red with a cut of half a percent in early deals. Traders remained on sidelines ahead of Goods and Services Tax (GST) roll out on midnight today. Market participants also remained concerned after Asian Development Bank said that implementation of Goods and Services Tax (GST) will remain a challenge for the government, as here can be some transitional issues like filing of returns and its scrutiny. Another issue might be that of enforcement by state and central government tax officials.

Global cues too dampened sentiments with Asian markets trading in red at this point of time despite China manufacturing activity beating expectations as select tech shares around the region sold off. The US markets ended in red terrain on Thursday as traders shrugged off report showing stronger than previously estimated U.S. economic growth in the first quarter. The gross domestic product (GDP) climbed by 1.4 percent in the first quarter compared to the previously reported 1.2 percent increase.

Back home, traders shrugged off Industry body Ficci’s statement that GST will bring about significant gains to India’s economy and it looks forward to working with the Government for successful implementation of the crucial tax reform. Telecom stocks edged lower with ICRA stating that intense competition and pricing pressure will continue to take a toll on the telecom sector with industry revenue expected to fall another 6 percent during the current financial year. Meanwhile, the market breadth indicating the overall health of the market was weak, with 693 shares gaining and 1,090 shares declining, while a total of 87 shares were unchanged.

The BSE Sensex is currently trading at 30687.62, down by 169.90 points or 0.55% after trading in a range of 30680.66 and 30824.97. There were 11 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.20%, while Small cap index was down by 0.42%.

The top gaining sectoral indices on the BSE were Healthcare up by 0.65%, FMCG up by 0.24%, IT up by 0.22%, Power up by 0.18% and Basic Materials up by 0.14%, while Realty down by 1.55%, Capital Goods down by 1.26%, Telecom down by 0.94%, Bankex down by 0.87% and Industrials down by 0.79% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 1.38%, Cipla up by 1.02%, Dr. Reddys Lab up by 0.95%, Power Grid Corporation up by 0.91% and TCS up by 0.79%. On the flip side, Larsen & Toubro down by 1.99%, ICICI Bank down by 1.52%, Kotak Mahindra Bank down by 1.21%, HDFC down by 1.11% and Tata Motors - DVR down by 1.10% were the top losers.

Meanwhile, after hitting a four-month low in the month of April, the share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) have surprisingly surged to a 7-month high of Rs 1.81 lakh crore at the end of May, despite stringent norms put in place by SEBI to curb inflow of illicit funds. This was highest since October last year, when the cumulative value of such investments stood at Rs 1,99,987 crore. According to Securities and Exchange Board of India (SEBI) data, total value of P-note investments in Indian markets including equity, debt and derivatives, at May-end, has climbed to Rs 180,718 crore, from Rs 1,68,545 crore at the end of April. Prior to that, the total investment value through P-notes stood at Rs 178,437 crore in March-end and Rs 170,191 crore in February-end.

Of the total, P-note holdings at May-end in equities were at Rs 109,211 crore, while in debts and derivatives were at Rs 23,834 crore and Rs 47,674 crore respectively. The quantum of FPI investments via P-notes rose to 6.3 percent in May from 6 percent in the preceding month. P-notes are issued by registered Foreign Portfolio Investors to overseas investors who wish to be a part of the Indian stock markets without registering themselves directly. They however need to go through a proper due diligence process.

SEBI had tightened P-note norms by levying a fee of $1,000 on each instrument and barred their issuance for speculative purposes to check any misuse for channelising black money. At the same time, the capital markets regulator had decided to relax the entry norms for foreign portfolio investors willing to invest directly in Indian markets rather than through participatory notes. The new measures follow a slew of other steps taken by the regulator in the recent past.

The CNX Nifty is currently trading at 9456.15, down by 47.95 points or 0.50% after trading in a range of 9448.75 and 9478.90. There were 14 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were Sun Pharma up by 1.77%, Aurobindo Pharma up by 1.44%, BPCL up by 1.21%, Power Grid Corporation up by 1.06% and Bank Of Baroda up by 1.00%. On the flip side, Indiabulls Housing down by 2.12%, Larsen & Toubro down by 2.03%, ICICI Bank down by 1.48%, HDFC down by 1.37% and Bharti Infratel down by 1.36% were the top losers.

Asian markets were trading in red; Nikkei 225 declined 237.33 points or 1.17% to 19,982.97, Hang Seng dropped 210.58 points or 0.81% to 25,754.84, Taiwan Weighted decreased 66.68 points or 0.64% to 10,354.97, KOSPI Index shed 11.01 points or 0.46% to 2,384.65, Shanghai Composite slipped 5.65 points or 0.18% to 3,182.41 and FTSE Bursa Malaysia KLCI was down by 3.36 points or 0.19% to 1,768.00.