Benchmarks end marginally lower; Sensex hold 31,300 mark

Friday turned out to be a choppy day of trade for Indian equity benchmarks, where Sensex and Nifty went home with marginal cut, as market participants opted to remain on sidelines ahead of the quarterly earnings starting next week. Markets started the session on pessimistic note and extended southward journey, breaching their crucial 31,300 (Sensex) and 9,650 (Nifty) levels, as traders remained cautious with the report that India slipped by one spot to become the fourth-largest foreign investor into the UK. India set up 127 new projects in Britain last year and safeguarded 7,645 existing jobs as a result and created 3,999 new jobs in 2016-17. Traders also stayed on sidelines ahead of outcome of the G20 Summit began on July 7, as world leaders assembled to discuss fight against terrorism and ways to improve open trade.

However, markets witnessed recovery in afternoon deals and get back their crucial bastions, as traders took some solace with report that net direct tax collection grew by 14.8 percent to Rs 1.42 lakh crore at the end of first quarter on account of surge in advance tax payments. According to the Ministry of Finance, the net direct tax collection represents 14.5% of the total Budget estimates of direct taxes of Rs 9.8 lakh crore for FY18. Traders also took some relief with Finance Minister Arun Jaitley’s statement that the rollout of the Goods and Services Tax has been smooth, without causing much disruption. He said the economy has not been disrupted and we don’t expect any disruption ahead, refuting critics who had thought that the GST rollout would impact trade and industry.

On the global front, European markets were trading mostly in red terrain in early deals on Friday, as investors look out for fresh economic data. Asian shares lost ground and snapped the session largely in red after a weak session on Wall Street, while global sovereign debt yields were elevated across the board on bets the European Central Bank is moving closer to unwinding its massive monetary stimulus.

Back home, appreciation in Indian rupee too aided sentiments. The Indian rupee strengthened against the US dollar at 64.60 at the time of equity markets closing from its previous close of 64.77 on fresh selling of the American unit by exporters and banks, after a key US employment report showed that the job growth has slowed. On the sectoral front, PSU Banking stocks remained 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. Sugar stocks remained in sweet spot on report that the central government is considering steps to protect the industry and farmers’ realizations as sugar production in India is estimated to go up 25-30% in the sugar year 2017-18. Meanwhile, the market breadth remained positive, as there were 1395 shares on the gaining side against 1282 shares on the losing side, while 137 shares remained unchanged.

Finally, the BSE Sensex shed 8.71 points or 0.03% to 31,360.63, while the CNX Nifty was down by 8.75 points or 0.09% to 9,665.80. 

The BSE Sensex touched a high and a low of 31,426.29 and 31,286.62, respectively and there were 11 stocks on gainers side as against 20 stocks on the losers side on the index.

The broader indices ended mixed; the BSE Mid cap index declined 0.04%, while Small cap index was up by 0.26%.

The top gaining sectoral indices on the BSE were Energy up by 1.63%, Realty up by 1.48%, Healthcare up by 1.03%, Oil & Gas up by 0.44% and Telecom up by 0.31%, while IT down by 0.73%, TECK down by 0.52%, Consumer Durables down by 0.37%, FMCG down by 0.36% and Bankex down by 0.25% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 3.43%, Lupin up by 3.28%, Dr. Reddy’s Lab up by 1.39%, Bharti Airtel up by 1.07% and Sun Pharma up by 0.88%. On the flip side, ICICI Bank down by 1.28%, Infosys down by 1.21%, Asian Paints down by 1.20%, Axis Bank down by 1.12% and Hero MotoCorp down by 1.11% 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 traded in a range of 9,684.25 and 9,642.65. There were 19 stocks in green as against 31 stocks in red on the index, while 1 stock remained unchanged.

The top gainers on Nifty were Reliance Industries up by 3.37%, Lupin up by 3.33%, Aurobindo Pharma up by 2.00%, Dr. Reddy’s Lab up by 1.41% and Zee Entertainment up by 1.26%. On the flip side, Bharti Infratel down by 2.50%, Vedanta down by 1.74%, Indiabulls Housing Finance down by 1.64%, Asian Paints down by 1.48% and ICICI Bank down by 1.38% were the top losers.

The European markets were trading mostly in red; Germany’s DAX decreased 25.04 points or 0.2% to 12,356.21 and France’s CAC was down by 17.51 points or 0.34% to 5,134.89, however UK’s FTSE 100 was up by 1.19 points or 0.02% to 7,338.47.

Asian equity markets ended mostly in red on Friday, tracking weak overnight cues from Europe and the US after data showed weaker-than-expected US private sector job growth in June and global sovereign debt yields rose across the board amid bets the European Central Bank will gradually remove policy accommodation in the near future. Simmering tensions in the Korean peninsula and caution ahead of this week's G20 summit as well as the all-important US jobs report, which includes both private and public sector jobs, due out later in the day also weighed on markets. Japanese shares ended lower after global shares tumbled, despite the yen weakening after the Bank of Japan's decision to raise its purchases of government bonds in its market operations. The dollar hit a seven-week high against the yen as the central bank pledged to buy unlimited amounts of government debt with a 10-year maturity at a yield of 0.11 percent. However, Chinese shares ended higher despite concerns over slowing economic growth and expectations of higher interest rates globally.