Benchmarks trade in red ahead of RBI policy outcome

Indian equity benchmarks erased their gains and started trading below neutral lines in the morning session on account of selling in blue chip counters. Traders remained on sidelines ahead of Reserve Bank of India’s (RBI) policy decision to be announced later in the day, which will decide the further course of action for the markets. Investors are expecting a 25 basis of rate cut as it’s the last chance for the committee through 2018 to spur the economy before the global central banks prepare to shift toward tighter policy, forcing emerging markets to keep pace. The manufacturing plummeted to its lowest in more than eight years in July, largely due to the rollout of GST at the beginning of the month. Also, sales of durables slumped, taking the industry by surprise. Investors shrugged off Minister of State for Finance Santosh Kumar Gangwar’s statement that the government has collected over Rs 1.80 lakh crore in direct tax till July 15 in the current fiscal, an increase of 21.4 per cent year-on-year, belying fears of slowdown in economic activities. The current growth rate is higher than the target rate of 15.32 percent required to achieve the Budget Estimate. Separately, asserting that the slowdown in the growth of the BRICS economies is not much of a concern, Organisation for Economic Cooperation and Development’s (OECD) development center deputy director, Federico Bonaglia has said India and China continue to maintain a very sustained growth. He added that BRICS countries will continue to play a key role in the global economy even though they reported slower growth in recent years.

Traders were seen piling up position in Consumer Durables, Utilities and Realty stocks, while selling was witnessed in Metal, FMCG and Capital Goods sector stocks. Telecom stocks were buzzing on S&P Global Ratings report that India’s big phone companies may be burning cash amid brutal competition for market share, but the fight for subscribers by offering rock-bottom prices triggered by the entry of Reliance Jio Infocomm is in its final stages. In scrip specific development, Hindustan Copper was trading in red after the company kicked started its two-day offer for sale (OFS) at a floor price of Rs 64.75, which is at discount to its Tuesday’s closing price of Rs 70.65 on BSE. The government, which holds 82.88 percent stake in the state-run PSU, is looking to sell 4 percent stake or over 3.70 crore shares amounting to Rs 240 crore.

On the global front, Asian markets were trading in green, with sentiment carrying over from the US after Apple earnings. Bank of Japan board member Yukitoshi Funo called for structural reforms to boost demand and productivity in a tacit acknowledgement that massive monetary stimulus alone cannot accelerate inflation to the central bank’s 2 percent target. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 32,600 and 10,100 levels respectively. The market breadth on BSE was negative in the ratio of 1064:1096, while 141 scrips remained unchanged.

The BSE Sensex is currently trading at 32563.23, down by 11.94 points or 0.04% after trading in a range of 32552.07 and 32686.48. There were 14 stocks advancing against 17 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.44%, while Small cap index was up by 0.14%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 0.58%, Utilities up by 0.53%, Realty up by 0.52%, Power up by 0.35% and Energy up by 0.25%, while Metal down by 1.01%, FMCG down by 0.65%, Capital Goods down by 0.53%, Basic Materials down by 0.36% and Industrials down by 0.30% were the top losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 2.85%, NTPC up by 2.18%, Lupin up by 1.39%, Axis Bank up by 0.78% and Reliance Industries up by 0.78%.

On the flip side, Bajaj Auto down by 0.96%, Larsen & Toubro down by 0.95%, Tata Steel down by 0.94%, Dr. Reddy’s Lab down by 0.77% and ONGC down by 0.75% were the top losers.

Meanwhile, after the successful rollout of the much awaited Goods and Services Tax (GST), the GST Council, at its next meeting will finalise a mechanism to operationalise anti-profiteering clause which seeks to protect consumers interest. The anti-profiteering law simply states that the businesses have to pass on the benefits arising out of lower taxes to the consumer.

As per Clause 171 of GST Act, it is mandatory to pass on the benefit due to reduction in rate of tax or from input tax credit to the consumer by way of commensurate reduction in prices. Finance Minister Arun Jaitley, referring to concerns raised by members with regard to impact of GST on prices, said it would be mandatory for manufacturers to pass on the benefits of reduction in taxes to consumers.

The minister hoped that the decision of price cut by automobile sector on account of benefit of input tax credit would be followed by others manufacturers. He further said that after taking into account input tax credit, weighted average tax is less than what it was on June 30. He added that it will also help in increasing the tax base and enhancing resources for the government for states as well as central government. The all powerful GST Council comprising state finance minister will meet on August 5 to take stock of implementation of GST which was rolled from July 1.

The CNX Nifty is currently trading at 10099.35, down by 15.30 points or 0.15% after trading in a range of 10097.05 and 10137.85. There were 19 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were Hero MotoCorp up by 2.69%, NTPC up by 1.91%, Lupin up by 1.39%, Bosch up by 1.20% and Reliance Industries up by 0.77%.

On the flip side, Indiabulls Housing Finance down by 1.57%, Hindalco down by 1.22%, Larsen & Toubro down by 1.15%, Bajaj Auto down by 1.08% and Tata Steel down by 1.00% were the top losers.

The Asian markets were trading in green; Shanghai Composite increased 4.1 points or 0.12% to 3,296.74, FTSE Bursa Malaysia KLCI increased 4.12 points or 0.23% to 1,769.25, KOSPI Index increased 6.34 points or 0.26% to 2,429.30, Jakarta Composite increased 11.1 points or 0.19% to 5,816.30, Taiwan Weighted increased 59.07 points or 0.57% to 10,496.36, Nikkei 225 increased 115.15 points or 0.58% to 20,100.94 and Hang Seng increased 156.8 points or 0.57% to 27,697.03.