Indian equity benchmarks managed to eke out modest gains

A session after displaying a distressing performance, Indian benchmark indices have managed to eke out moderate gains on Wednesday, tracking positive trade in global markets after focus shifted from geopolitical tensions around North Korea to minutes from the US Federal Reserve’s last policy meeting. Sentiments got a boost after India’s services PMI rose to an eight month high in June at 53.1 as against 52.2 in May of 2017. This was also the fifth consecutive month of expansion as business environment for services sector in the country continued to improve. Some support also came with the report that global & domestic private equity funds have pumped in around $11.3 billion in the country for the first half of the current year ending June 30, making it the record highest foreign direct investment into the country. Adding optimism among investors, an Assocham-APAS study revealed that with the rollout of the Goods and Services Tax (GST), the industry alone is expected to contribute $280 billion to India's Gross Domestic Product (GDP) in the next eight to nine years. According to the chamber, the GST will enable positive structural changes in the ease of doing business, which in turn would propel the growth.

On the global front, Asian equity markets ended mostly higher on Wednesday, as market participants shrugged off geopolitical worries and looked ahead to the release of minutes of the Fed’s June meeting later in the day and the outcome of G20 summit, beginning Friday in Germany. Markets also shrugged off data from a private business survey that showed China’s services sector grew at a slower pace in June as new orders slumped, pointing to a softening outlook for the economy. Further, safe haven gold advanced while the yen was little changed after North Korea’s missile launch raised worries the reclusive nation is planning to build a device to attack the United States mainland. Meanwhile, European stocks grappled for direction in early trade, as losses for pharmaceutical companies and car makers dragged on the region’s indices, even as fresh data painted an upbeat picture of the eurozone economy.

Back home, the market breadth remained optimistic, as there were 1706 shares on the gaining side against 968 shares on the losing side, while 142 shares remained unchanged.

Finally, the BSE Sensex gained 35.77 points or 0.11% to 31245.56, while the CNX Nifty was up by 24.30 points or 0.25% to 9,637.60. 

The BSE Sensex touched a high and a low of 31284.64 and 31177.78, respectively and there were 19 stocks on gainers side as against 12 stocks on the losers side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.97%, while Small cap index was up by 1.12%.

The top gaining sectoral indices on the BSE were Realty up by 1.54%, Basic Materials up by 1.30%, Metal up by 1.24%, Energy up by 1.03% and Industrials up by 0.99%, while FMCG down by 0.62%, IT down by 0.50%, TECK down by 0.37% and Telecom down by 0.02% were the top losing indices on BSE.

The top gainers on the Sensex were Lupin up by 3.82%, Mahindra & Mahindra up by 2.24%, Asian Paints up by 1.74%, ONGC up by 1.69% and Axis Bank up by 1.34%. On the flip side, ITC down by 1.79%, Infosys down by 0.98%, Wipro down by 0.94%, HDFC down by 0.83% and Kotak Mahindra Bank down by 0.40% were the top losers.

Meanwhile, with Goods and Services Tax (GST) rate being lower than 6% levy prevailing in a majority of the states, domestic credit rating agency, ICRA in its latest report has said that retail prices of fertiliser will come down marginally, which would in turn benefit the farmers. Nevertheless, it also said that a few states such as Haryana, Punjab and Andhra Pradesh, where fertiliser sales were exempt from value-added tax (VAT) and attract only 1% excise duty, will face increased tax incidence of 5% and thus prices will see upward movement in these states.

The rating agency said that the government has paid attention to the industry and farmer demand to reduce the GST on fertilisers to 5% from 12%, which is positive for the farming community. It noted that the earlier 12% tax rate would have led to an increase in fertiliser prices by 6-10% and could have impacted the demand. Though, it said that the new rate of 5% will result in a marginal reduction in retail prices of fertilisers. Besides, ICRA expects that the move would reduce the cost of a 50 kg bag of urea by Rs 3. However, it added that the decision is credit neutral for the industry as the working capital requirement would remain unchanged as before.

According to the report, for DAP and NPK manufacturers there is no relief as the tax on the key raw materials, that is phosphoric acid and ammonia, has been retained at 18%, giving rise to an inverted duty structure, where the final output (DAP or NPK) fertilisers are taxed at 5%, while raw material is taxed at 18%. As a result, it noted that the competitiveness of domestic manufacturers against importers will erode. It pointed out that a timely refund of excess input tax credit by the government will be the key to the liquidity position of both domestic manufacturers and importers of P&K fertilisers.

The CNX Nifty traded in a range of 9,643.65 and 9,607.35. There were 37 stocks in green as against 14 stocks in red on the index.

The top gainers on Nifty were Lupin up by 4.03%, Vedanta up by 2.57%, ZEEL up by 2.20%, Asian Paint up by 2.12% and M&M up by 2.06%. On the flip side, ITC down by 1.66%, Infosys down by 1.05%, Wipro down by 1%, Bharti Airtel down by 0.7% and Gail down by 0.62% were the top losers.

The European markets were trading mostly in red; UK’s FTSE 100 decreased 8.96 points or 0.12% to 7,348.27, Germany’s DAX decreased 2.9 points or 0.02% to 12,434.23, while France’s CAC increased 5.04 points or 0.1% to 5,179.94.

Asian equity markets ended mostly in green on Wednesday as investors shrugged off geopolitical worries and looked ahead to the release of minutes of the Fed's June meeting later in the day and the outcome of G20 summit, beginning Friday in Germany. Japanese shares ended modestly higher as the yen pared early gains and a private survey showed activity in Japan's services sector expanded at a faster rate in June. Further, Chinese shares ended higher after the announcement on allowing foreign investment in the Chinese bond market. Investors shrugged off the latest survey from Caixin showing that growth in China's services sector slowed in June. The PMI dropped to 51.6 from 52.8 in May.