Post Session: Quick Review

Indian equity markets traded on cheerful note throughout the day and ended the session with a gain of around one percent following the launch of the country’s biggest indirect tax reform -- the Goods and Services Tax (GST). The rollout of GST has been positive and largely hassle-free, with no checks on state borders, smooth customs operations and no major problems reported. The government is now looking at a massive outreach to consumers as well as industry to clarify all issues and highlight the benefits of the tax regime. The equity benchmarks traded in fine fettle in early deals after Moody’s Investors Service said that implementation of the GST will be positive for India’s rating as it will lead to higher GDP growth and increased tax revenues. The agency expects improved tax compliance to be driven by incentivisation of tax credits in a GST system. Sentiments got a boost with report that the government has ramped up capital spending by nearly 60% in the first two months of the current financial year, in a bid to perk up investment sentiment and crowd in private investment. Early passage of the budget in March has allowed the government start spending from the beginning of the new financial year in April. In April-May, the government spent Rs 52,536 crore, 58% more than the year earlier period. Meanwhile, the Association of Chartered Certified Accountants (ACCA) highlighted that the ‘shadow economy’ in India will shrink to 13.6% of the GDP by 2025. Shadow economy refers to the production of and trade in goods and services that are deliberately and often illegally concealed from public authorities.

Investors took note that the southwest monsoon advanced over the National Capital Region (NCR) and most parts of Jammu & Kashmir and other Himalayan states. It is expected to race ahead and cover the rest of the country, including western Rajasthan, in the next two weeks. Rainfall on Sunday was 50% above normal in most regions except the southern peninsula. Besides, Foreign Investors have pumped over Rs 29,000 crore in the country’s capital market in June, making it the highest inflow in three months, enthused by the GST and forecast of a normal monsoon. This also marks the fifth consecutive monthly inflow by overseas investors. According to latest depository data, FPIs invested a net Rs 3,617 crore in equities last month, while they poured Rs 25,685 crore in the debt markets during the period under review, translating into a net inflow of Rs 29,302 crore ($4.55 billion). Traders shrugged off the report that contraction in output of coal and fertilizer slowed the growth rate of eight core sector to 3.6% in the month of May 2017, as compared to 5.2% in May last year, though it was higher as compared to 2.8% in April 2017, with a sharp rise in the output of electricity, refinery and natural gas production.

On the global front, Asian markets closed mostly in green. Caixin’s China manufacturing PMI for June beat expectations, offering hope the world’s second-largest economy continues to defy expectations for a slowdown. The private survey came in at 50.4, marking a three-month high. The European markets were trading in green led by banks as the pound weakened. Manufacturing activity in the UK fell more than expected in June, causing concern over the British economy at the end of the second quarter.

Back home, fertilizer stocks like Rashtriya Chemicals & Fertilizers, Coromandel International, National Fertilizers, Gujarat State Fertilizers & Chemicals, Gujarat Narmada Valley Fertilizers & Chemicals, Chambal Fertilisers & Chemicals and Zuari Agro Chemicals closed in green after the GST rate on fertilizer prices were being slashed to 5 per cent from 12 per cent proposed earlier, a decision taken in the interest of farmers.

The BSE Sensex ended at 31221.15, up by 299.54 points or 0.97% after trading in a range of 31017.11 and 31258.33. There were 22 stocks advancing against 9 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 1.13%, while Small cap index was up by 1.10%. (Provisional)

The top gaining sectoral indices on the BSE were FMCG up by 3.45%, Basic Materials up by 1.87%, Metal up by 1.84%, Telecom up by 1.80% and Consumer Disc up by 1.39%, while there were no losing indices. (Provisional)

The top gainers on the Sensex were ITC up by 5.77%, Hero MotoCorp up by 2.39%, Maruti Suzuki up by 2.04%, Coal India up by 1.99% and Infosys up by 1.85%. (Provisional)

On the flip side, NTPC down by 1.23%, Sun Pharma down by 0.54%, Cipla down by 0.53%, Lupin down by 0.50% and Tata Motors down by 0.47% were the top losers. (Provisional)

Meanwhile, signaling weaker improvement in the health of the sector, manufacturing activity in India fell to a four-month low in June amid softer rise in factory new orders. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index (PMI)-a composite single-figure indicator of manufacturing performance-slipped to 50.9 in the month of June as against 51.6 in the month of May. However, the reading remained above the 50 level that separates growth from contraction for a sixth straight month on the back of ongoing increases in client demand.

According to the survey data, the challenging economic conditions, water shortages and the upcoming implementation of the goods & services tax (GST) hampered on the growth of the sector. Further, it said that growth of total order books eased to a four-month low, with the intermediate goods category the key source of weakness. Besides, payroll numbers and purchasing activity witnessed marginal increment in the month of June. The survey also pointed that ongoing growth of buying levels, though the rate of expansion has softened from May.

In the month of June, input costs continued to increase, however, the rate of inflation was modest and the weakest since August 2016. Similarly, output charges rose only slightly, at a below-trend pace. Besides, confidence towards future performance was mixed among the survey participants. While the new tax system is anticipated by some firms to generate more business, others expect the GST will have a negative impact on their businesses.

The CNX Nifty ended at 9615.85, up by 94.95 points or 1.00% after trading in a range of 9543.55 and 9624.00. There were 36 stocks advancing against 15 stocks declining on the index. (Provisional)

The top gainers on Nifty were Bharti Infratel up by 6.26%, ITC up by 5.82%, Hindalco up by 3.14%, Eicher Motors up by 2.55% and Vedanta up by 2.11%. (Provisional)

On the flip side, HCL Tech down by 1.30%, NTPC down by 1.23%, Sun Pharma down by 0.85%, Lupin down by 0.65% and Tata Motors down by 0.60% were the top losers. (Provisional)

The European markets were trading in green; UK’s FTSE 100 increased 32.04 points or 0.44% to 7,344.76, Germany’s DAX increased 85.1 points or 0.69% to 12,410.22 and France’s CAC increased 52.32 points or 1.02% to 5,173.00.

Asian equity markets ended mostly in green on Monday as investors digested cheering economic news out of China and Japan. The survey of Chinese manufacturing from Caixin found output at a three-month high in June, while Japan's official 'tankan' snapshot of business sentiment showed levels of cheer at their highest for more than three years. Meanwhile, investors awaited cues from this week's G20 summit, the Wednesday release of Fed minutes and the US nonfarm payrolls report to be released on Friday. Japanese shares closed marginally higher as upbeat business sentiment figures helped offset the Liberal Democratic Party's disastrous defeat in the Tokyo metropolitan assembly election. Also, the yen erased gains after surging higher earlier in the day.