Geopolitical tension drag benchmarks lower for fourth straight session

Indian equity benchmarks extended their southward journey for fourth straight session, breaching their crucial 9,850 (Nifty) and 31,600 (Sensex) levels on escalating tensions between the US and North Korea. Markets started the session on pessimistic note and traded sluggish throughout the day, as Geopolitical worries continue to weigh on the sentiments. In the latest escalation of tensions between Washington and Pyongyang, the isolated Asian country threatened a missile strike at US territory Guam. That saber-rattling came a day after US President Donald Trump said he would respond with fire and fury like the world has never seen if the country doesn’t halt its threats. Back on regional turf, traders remained concerned with the report that India’s retail inflation is expected to have picked up slightly in July after cooling in the previous three months, but likely remained well below the central bank's 4 percent medium-term target. Sentiments also remained downbeat on report that that India’s agricultural exports have declined to $33.87 billion in 2016-17 from $43.23 billion in 2013-14. The primary reasons for decline in export of agricultural commodities are low commodity prices in the international market, which has made exports uncompetitive.

Meanwhile, traders failed to get any sense of relief with report that a contraction in refund outgo, rich dividends from ‘Operation Clean Money’ and more assessees coming under the income tax net post demonetisation, net direct tax collections surged 19.1 percent to Rs1.90 lakh crore during April-July. Investors also paid no heed to Adi Godrej’s statement that despite certain teething problems under the new tax regime, the Goods and Services Tax (GST) will lead to considerable increase in the GDP in the next six months.

Markets extended its losses tracking weak opening in European counters, while Asian markets ended mostly in red, as investors fretted on lingering North Korea tensions, sending Seoul shares skidding to two-month lows even as the previous day’s rush into safe-haven assets appeared to slow.

Back home, some selling also crept in on foreign brokerage’s report that India’s industrial production is expected to be anemic 0.3 percent for June, partly on account of retailers reducing stocks before the implementation of GST. The report added that before the implementation of GST, destocking was triggered largely owing to a steep fall in demand from consumers as they delayed purchases on expectation of getting better price post the new indirect tax regime. On the sectoral front, banking stocks edged lower with the Global credit rating agency, Care Ratings' latest research report that the Indian banking industry continued to remain under pressure in the first quarter of current financial year because of slower pace in growth rate of credit and deposits, it added that the non performing assets (NPAs) also remained high as of June 2017.

The NSE’s 50-share broadly followed index Nifty declined by around ninety points to end below its psychological 9,850 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex was down by around two hundred and seventy points to end below its crucial 31,600 mark. The broader markets too witnessed selling pressure and ended the session with a massive cut of around three percent. The market breadth was in the favour of decliners, as there were 360 shares on the gaining side against 2,214 shares on the losing side, while 109 shares remain unchanged.

Finally, the BSE Sensex declined 266.51 points or 0.84% to 31,531.33, while the CNX Nifty was down by 87.80 points or 0.89% to 9,820.25.

The BSE Sensex touched a high and a low of 31,756.27 and 31,422.80, respectively and there were 8 stocks on gaining side as against 23 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index was down by 2.64%, while Small cap index was down by 2.90%.

The only gaining sectoral indices on the BSE were IT up by 0.63% and TECK was up by 0.13%, while Realty down by 5.12%, Healthcare down by 3.15%, Utilities down by 2.84%, Industrials down by 2.82% and Auto was down by 2.79% were the top losing indices on BSE.

The top gainers on the Sensex were Infosys up by 1.35%, Wipro up by 0.44%, TCS up by 0.37%, Larsen & Toubro up by 0.30% and Mahindra & Mahindra up by 0.26%. On the flip side, Tata Motors - DVR down by 9.26%, Tata Motors down by 8.60%, Dr. Reddy’s Lab down by 4.77%, Sun Pharma down by 3.08% and Adani Ports & SEZ down by 2.66% were the top losers.

Meanwhile, continuing its steady growth, net direct tax collections, which are made up of personal and corporate taxes, was up by 19.1 percent to Rs 1.90 lakh crore in the first four months (April to July) of the financial year 2018, as demonetisation of higher denomination currency brought in more number of individuals in tax net. This indicates that 19.5 percent of the annual budget target of direct taxes (Rs 9.8 lakh crore) had been achieved. In April-July of 2016-17, the direct tax collection grew by 24.01 percent to Rs 1.59 lakh crore.

Apart from this, the gross revenue collection of Corporate Income Tax (CIT) grew at 7.2 percent, while Personal Income Tax (PIT) grew at 17.5 percent. However, after adjusting for refunds, the net growth in CIT collections is 23.2 percent while that in PIT collections is 15.7 percent.  Further, refunds amounting to Rs 61,920 crore have been issued during April-July, 2017 which are 5.1 percent lower than the refunds issued during the corresponding period last year. 

Earlier this week, the government had released the numbers of income tax returns filed, showing demonetisation of old Rs 500 and Rs 1,000 notes had given the substantial growth. The total number of returns filed as on August 5 stands at around 2.83 crore up from 2.27 crore filed during the corresponding period of 2016-17. This was an increase of 24.7 per cent compared to growth rate of 9.9 per cent in the previous year. Individual tax returns filed were up 25.3 per cent at 2.79 crore.

The CNX Nifty traded in a range of 9,892.65 and 9,776.20. There were 19 stocks in green as against 32 stocks in red on the index.

The top gainers on Nifty were Tech Mahindra up by 2.58%, Infosys up by 1.23%, Wipro up by 0.58%, HCL Tech up by 0.47% and Kotak Mahindra Bank up by 0.44%. On the flip side, Tata Motors down by 8.62%, Tata Motors - DVR down by 8.59%, Dr. Reddy’s Lab down by 5.07%, GAIL India down by 4.50% and Eicher Motors down by 4.37% were the top losers.

European markets were trading in red; Germany’s DAX decreased 87.32 points or 0.72% to 12,066.68, UK’s FTSE 100 declined 79.13 points or 1.06% to 7,418.93 and France’s CAC decreased 15.01 points or 0.29% to 5,130.69.

Asian equity markets closed mostly lower on Thursday as geopolitical tensions persisted, the yen stayed firm and oil struggled for direction after rising on Wednesday on EIA data showing a sharp decline in crude inventory for sixth week in a row. Meanwhile, investors looked ahead to US producer and consumer inflation data due this week for additional clues on the Fed's rate outlook. Japanese shares ended marginally lower as the yen remained stronger against the dollar and official data showed Japan's core machinery orders, an indicator of capital spending, unexpectedly fell for a third consecutive month in June, underscoring the fragile nature of the country's export-driven economic recovery. Further, Chinese shares ended lower as material stocks succumbed to profit taking after recent sharp gains.