Markets remain lackluster; ITC drags

Indian equity benchmarks continued showing lackluster trade in late morning session amid lower Asian markets, with the Sensex falling over 250 points and the Nifty down by 60 points. Investors were concerned with the industry body Associated Chambers of Commerce & Industry of India’s (ASSOCHAM) latest report that the inflation outlook is expected to remain quite muted at least till festival season of Durga Puja and Diwali. Some losses also came on account of heavy selling in FMCG, Energy and Oil & Gas stocks. The report stating that India Inc is bullish on the country's economic prospects with 88 percent of CEOs being optimistic about the Indian economy's growth prospects over the next three years, was largely overlooked by the market participants.

On the sectoral front, shares of some pharma companies were trading higher with Care Ratings’ latest report that despite pricing pressure and stiff competition, the Indian Pharma exports to the USA may go up in 2017-18 as $ 50 billion worth of drugs are expected to become off-patented during the current year giving hope to boost export market, while shares of Cigarette companies were trading lower following an announcement from the Ministry of Finance about an increase in the cess rate on cigarettes.

On the global front, Asian markets were trading in red on growing expectations that the Federal Reserve will take a more cautious approach to raising interest rates. Back home, in scrip specific development, Gallantt Ispat traded higher after the company received an approval for availing of bank loan facilities to the tune of Rs 60.00 crore from HDFC Bank.

The BSE Sensex is currently trading at 31805.99, down by 268.79 points or 0.84% after trading in a range of 31626.44 and 31911.61. There were 26 stocks advancing against 5 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.08%, while Small cap index down by 0.07%.

The top gaining sectoral indices on the BSE were IT up by 0.71%, TECK up by 0.71%, Telecom up by 0.64%, Healthcare up by 0.63% and Auto up by 0.52%, while FMCG down by 5.71%, Energy down by 1.09%, Oil & Gas down by 0.54%, Consumer Durables down by 0.38% and Metal down by 0.28% were the top losing indices on BSE.

The top gainers on the Sensex were Cipla up by 1.60%, Bharti Airtel up by 1.41%, Dr. Reddy’s Lab up by 1.14%, Sun Pharma Inds. up by 1.04% and Infosys up by 1.00%. On the flip side, ITC down by 11.82%, Reliance Industries down by 2.12%, Coal India down by 0.20%, HDFC Bank down by 0.17% and ICICI Bank down by 0.03% were the top losers.

Meanwhile, in view of the reduction in tax on the demerit good under the new indirect tax regime, the Goods and Services Tax (GST) Council, at its 19th meeting headed by Finance Minister Arun Jaitley, decided to increase the cess applied on certain types of cigarettes by as much as 31%. The cess on these items is over and above the 28% GST rate applied to them. This was the only item on the agenda for the meeting. The increase in cess would bring in Rs 5,000 crore of additional tax revenue which otherwise would have gone to the manufacturers. However, cigarette prices will not change as a result of the increased cess which became effective from July 18.

As per the official statement ‘In respect of cigarettes, the Fitment Committee had recommended that in line with the weighted average VAT rate (28.7%) the GST rate on cigarettes may be kept at 28%”. However, this method of calibrating the compensation cess did not take into consideration the cascading of taxes. As a result, the total tax incidence on cigarettes in GST regime has come down, as compared to the total tax in pre-GST regime. Hence, it decided to increase the compensation cess on all cigarettes.

While the peak GST rate of 28 percent stays and so does 5 percent ad valorem cess on top of it, the cess on cigarettes will now be higher by Rs 485-792 per thousand sticks for different varieties of the commodity. The new cess rate for non-filter and filter cigarettes of length not exceeding 65 mm would be 5 percent plus Rs 2,076 per thousand sticks. For non-filter cigarettes of 65 mm to 70 mm length, the rate would be 5 percent plus Rs 3,668 per thousand sticks as against 5 percent plus Rs 2,876 currently.

Moreover, filter cigarettes of 65 to 70 mm length would now attract a 5 percent plus Rs 2,747 per thousand stick cess as compared to present 5 percent plus Rs 2,126. The same for 70 mm to 75 mm cigarettes would be 5 percent plus Rs 3,668 per thousand sticks. For other cigarettes, the cess would be 36 percent plus Rs 4,170 per thousand sticks as compared to 5 percent plus Rs 4,170 currently. Meanwhile, the all-powerful GST Council will meet in first week of August to review the progress of the implementation of GST, which was rolled out on 1 July.

The CNX Nifty is currently trading at 9854.40, down by 61.55 points or 0.62% after trading in a range of 9792.05 and 9885.35. There were 36 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were ACC up by 1.88%, Ultratech Cement up by 1.69%, Bharti Airtel up by 1.44%, Cipla up by 1.37% and BPCL up by 1.17%. On the flip side, ITC down by 11.72%, Reliance Industries down by 2.12%, GAIL India down by 1.88%, Aurobindo Pharma down by 0.99% and Hindalco down by 0.74% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 decreased 133.93 points or 0.67% to 19,984.93, Hang Seng decreased 45.69 points or 0.17% to 26,424.89, Jakarta Composite decreased 28.01 points or 0.48% to 5,813.27, Shanghai Composite decreased 14.68 points or 0.46% to 3,161.79, KOSPI Index decreased 2.16 points or 0.09% to 2,422.94 and FTSE Bursa Malaysia KLCI decreased 0.8 points or 0.05% to 1,754.39. On the flip side, Taiwan Weighted increased 7.51 points or 0.07% to 10,465.05.