Benchmarks trade in green in late morning session

Indian equity benchmarks continued their trade in green in late morning session, on account of buying in frontline blue chip counters. Traders were taking support with Fitch in its latest report said that the newly launched one nation one tax, namely Goods and Services Tax (GST) is likely to remove domestic trade barriers and will boost revenue indirectly over the long term as it supports Gross Domestic Product (GDP) growth and encourages tax compliance. The Nikkei India Services Purchasing Managers’ Index, or PMI, rose to an eight-month high of 53.1 in June as a solid and accelerated upturn in new work resulted in a faster increase in activity. May’s figure was 52.2. The report enlightened that with services being the prevalent sector in India, the fainter rise in manufacturing was more than offset and growth of private sector output climbed to an eight-month peak. Separately, global and 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. Meanwhile, telecom stocks were buzzing on foreign brokerage report that Reliance Jio is likely to launch its much-awaited 4G VoLTE feature phone within this month, putting the price at as low as Rs 500, a move which could bring in another wave of disruption in the telecom market. The launch - which some believe could be announced at parent Reliance Industries’ annual general meeting on July 21 - would follow Jio’s likely announcement of a new tariff plan with aggressive price-points over the next couple of days with its 84-day Dhan Dhan offer.

Traders were seen piling up position in Energy, Basic Materials and Metal stocks, while selling was witnessed in Telecom, TECK and IT sector stocks. In scrip specific development, Jyoti Structures was trading in red after the National Company Law Tribunal (NCLT) gave the go-ahead to banks to initiate insolvency proceedings against the company making it the first among the 12 companies identified by the Reserve Bank of India for bankruptcy proceedings.

On the global front, Asian shares were trading mostly in green. A holiday in the United States and a dearth of major data kept activity muted across Asia, though minutes of the Federal Reserve’s last meeting due later in the day could provide some impetus. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 9,600 and 31,200 levels respectively. The market breadth on BSE was positive in the ratio of 1420:718, while 104 scrips remained unchanged.

The BSE Sensex is currently trading at 31254.71, up by 44.92 points or 0.14% after trading in a range of 31189.90 and 31284.64. There were 20 stocks advancing against 11 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.66%, while Small cap index was up by 0.80%.

The top gaining sectoral indices on the BSE were Energy up by 0.95%, Basic Materials up by 0.88%, Metal up by 0.82%, Industrials up by 0.75% and Oil & Gas up by 0.69%, while Telecom down by 0.59%, TECK down by 0.40%, IT down by 0.33%, FMCG down by 0.22% and Consumer Durables down by 0.03% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 2.35%, Tata Motors - DVR up by 1.73%, Reliance Industries up by 1.36%, Axis Bank up by 1.24% and Tata Motors up by 1.03%.

On the flip side, Bharti Airtel down by 1.11%, HDFC down by 0.89%, ITC down by 0.88%, Wipro down by 0.81% and Infosys down by 0.62% were the top losers.

Meanwhile, global ratings agency, Fitch ratings in its latest report has said that the newly launched one nation one tax, namely Goods and Services Tax (GST) is likely to remove domestic trade barriers and will boost revenue indirectly over the long term as it supports Gross Domestic Product (GDP) growth and encourages tax compliance. But it also said that it poses significant short-term risks, emphasised by the late changes to the bill and the disruptive roll-out of demonetization. Fitch has said that the landmark tax reform that came into effect from July 1, 2017,  is relatively complex, including multiple tax rates for different goods - ranging from 0-28%, or higher where ‘sin taxes’ are applied - and requires frequent filing in all states in which a company operate. The ratings agency however said that it is ‘far simpler’ than the previous system, under which each state set its own sales taxes - in addition to the central government - and imposed border taxes on goods entering the state.

The US-based credit rating agency also said that the unified national system should offer significant opportunities for productivity and added that it will become much quicker and less costly to move goods across the country now that trucks will not be held up at checkpoints at state borders. It added that smoother logistics should reduce retailers’ need for working capital and allow them to operate centralised warehouses, rather than in every state. Supply chains could extend, encouraging specialisation, now that there is less incentive to source goods within state border. Tax filing may also become less time-consuming as a result of the new electronic system. Large companies will now have an incentive to pressure smaller suppliers into compliance.

As per the report, the new electronic filing system is also likely to lead to more tax reporting. Moreover, the tax base will be broadened, as SMEs with sales of only Rs 20 lakh will now be exempt from paying GST, down from Rs 1.5 crore. Small informal retailers also find it harder to understate their sales or to avoid filing tax returns altogether in a system where transactions are tracked throughout the supply chain, as a result this could accelerate the shift toward organised retail. It added that the informal sector is very large, accounting for over 20% of GDP and 80% of employment, and is largely untaxed. This is one of the reasons why government revenue is low, at just 21.4% of GDP in 2016, compared with a median of 29.9% for ‘BBB’ range sovereigns.

The CNX Nifty is currently trading at 9632.50, up by 19.20 points or 0.20% after trading in a range of 9607.35 and 9633.60. There were 36 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 2.25%, Tata Motors - DVR up by 1.54%, Reliance Industries up by 1.52%, Yes Bank up by 1.46% and Ambuja Cement up by 1.34%.

On the flip side, Bharti Airtel down by 1.24%, Aurobindo Pharma down by 0.99%, Wipro down by 0.96%, ITC down by 0.95% and Infosys down by 0.85% were the top losers.

The Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 0.62 points or 0.04% to 1,762.70, KOSPI Index increased 6.2 points or 0.26% to 2,386.72, Shanghai Composite increased 9.3 points or 0.29% to 3,192.10, Nikkei 225 increased 24.38 points or 0.12% to 20,056.73, Taiwan Weighted increased 41.45 points or 0.4% to 10,389.23 and Hang Seng increased 123.7 points or 0.49% to 25,512.71.

On the other hand, Jakarta Composite decreased 14.12 points or 0.24% to 5,851.24.