Benchmarks continue weak trade with modest cut

Indian equity benchmarks continued their weak trade in late morning session, on account of selling in frontline blue chip counters tracking weak global cues and profit booking. The rupee opened higher against dollar on account of selling of American currency by banks and exporters amid concerns over a possible rate hike by the US Federal Reserve. Foreign Portfolio Investors stood net buyers in domestic equity markets on Thursday and bought shares worth 124.91 crore with gross purchases and gross sales of Rs 3,521.81 crore and Rs 3,396.90 crore, respectively. Investors took note of Nobel laureate Paul Krugman’s statement that he was puzzled by demonetization and that it was a blunt instrument to tackle the problem of black money and corruption. He said that Prime Minister Narendra Modi’s performance is a bit below expectations and called on the government and RBI to spur economic growth by cutting rates and increasing fiscal spending. Meanwhile, former Union Finance Minister P Chidambaram said that the aim was for one indirect tax to subsume all the other indirect taxes, but this GST fails to achieve that. PSU Banking stocks were buzzing on reports that the government is likely to infuse more money in state-run banks amid crackdown on bad loans and increasing capital needs under Basel III guidelines. The exact amount will be decided after the first quarter results of banks are available.

Traders were seen piling up position in Healthcare, Realty and Capital Goods stocks, while selling was witnessed in Consumer Durables, FMCG and IT sector stocks. In scrip specific development, debt-ridden Bhushan Steel was trading in red on reporting a net loss of Rs 1,130.65 crore in the fourth quarter ended March 31, 2017, much larger than Rs 756.76 crore mentioned in the unaudited results in May this year. IDFC Bank was trading firm on reports that IDFC and Shriram groups are in talks to combine all or some of their businesses in a mega union that could straddle traditional banking, consumer lending and truck financing, apart from providing billionaire Ajay Piramal an entry into a highly regulated industry.

On the global front, Asian shares were trading in red, following a weaker close overnight. The dollar gained in Asian trading on Friday, getting a leg up against the yen after the Bank of Japan increased its purchases of Japanese government bonds in a move aimed at stemming a rise in yields. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 9,700 and 31,400 levels respectively. The market breadth on BSE was positive in the ratio of 1099:1082, while 107 scrips remained unchanged.

The BSE Sensex is currently trading at 31321.42, down by 47.92 points or 0.15% after trading in a range of 31286.62 and 31394.16. There were 16 stocks advancing against 15 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.01%, while Small cap index was up by 0.16%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.34%, Realty up by 1.01%, Capital Goods up by 0.24%, Power up by 0.10% and PSU up by 0.06%, while Consumer Durables down by 0.30%, FMCG down by 0.28%, IT down by 0.26%, Bankex down by 0.24% and Auto down by 0.22% were the top losing indices on BSE.

The top gainers on the Sensex were Lupin up by 4.41%, Dr. Reddy’s Lab up by 1.90%, Mahindra & Mahindra up by 1.59%, Cipla up by 1.07% and Sun Pharma up by 0.94%.

On the flip side, HDFC down by 0.96%, Hero MotoCorp down by 0.90%, Asian Paints down by 0.84%, Tata Motors down by 0.84% and ICICI Bank down by 0.83% were the top losers.

Meanwhile, Mauritius has signed the Multilateral Convention to Implement Tax Treaty Related Measures to prevent Base Erosion and Profit Shifting (BEPS). Once ratified, the OECD’s Multilateral Instrument (MLI) will affect as many as 23 tax treaties entered into by the island nation, which has been an important jurisdiction for routing investments into India.

Most importantly, Mauritius has kept its double taxation avoidance treaty with India out of the purview of the global agreement that seeks to prevent companies from avoiding taxes. The island nation has opted for Principal Purpose Test (PPT) for the purpose of combating treaty abuse. Under this rule treaty benefit is denied where principal purpose of investment is to gain tax benefit.

Mauritius has also reaffirmed that it will implement the minimum standards outlined in the OECD/ G20 BEPS plan by 2018. Mauritius expressed its commitment to the BEPS project and stated that the tax treaties which are not covered by the MLI will be subject to a bilateral discussion with the respective treaty partners.

The MLI is a legal instrument designed to prevent Base Erosion and Profit Shifting by multinational enterprises. The MLI allows jurisdictions to transpose results from the OECD/ G20 BEPS project, including minimum standards to implement in tax treaties, to prevent treaty abuse and 'treaty shopping', into their existing networks of bilateral tax treaties in a quick and efficient manner.

The CNX Nifty is currently trading at 9655.15, down by 19.40 points or 0.20% after trading in a range of 9642.65 and 9672.70. There were 20 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Lupin up by 4.69%, Dr. Reddy’s Lab up by 2.09%, Aurobindo Pharma up by 1.48%, Zee Entertainment up by 1.37% and Cipla up by 1.23%.

On the flip side, Bharti Infratel down by 1.98%, HDFC down by 1.26%, Hero MotoCorp down by 0.98%, Asian Paints down by 0.98% and GAIL India down by 0.91% were the top losers.

The Asian markets were trading in red; Hang Seng decreased 97.93 points or 0.38% to 25,367.29, Nikkei 225 decreased 84.22 points or 0.42% to 19,909.84, Taiwan Weighted decreased 63.71 points or 0.61% to 10,304.49, FTSE Bursa Malaysia KLCI decreased 8.97 points or 0.51% to 1,761.56, KOSPI Index decreased 7.01 points or 0.29% to 2,380.80, Shanghai Composite decreased 6.24 points or 0.19% to 3,206.20 and Jakarta Composite decreased 0.33 points or 0.01% to 5,849.25.