Post Session: Quick Review

Indian equity benchmarks traded in green for most part of the day and ended the session on a strong note for second straight day with gains of more than one percent. The markets traded on a lackluster note for first half of day but buying in later half helped the markets to close near intraday high, with Nifty touching 9,900 mark. The equity benchmarks pared all its gains and made a flat start in early deals as traders remained concerned after retail inflation increased to 2.36% in July from 1.46% in June, wholesale inflation rose to 1.88%, showing effects of implementation of GST and 7th Pay Commission. This effectively shoots down the probability of any near-term interest rate cut by the Reserve Bank of India (RBI). Investors took note that the slowdown in exports may mark the beginning of trouble ahead. On Monday, official data showed exports slowing to an eight-month low in July in the current 11-month cycle of growth of exports with shipments remaining stuck in factories in the first week of last month. The steepest decline was in traditional labour-intensive sectors such as gems and jewellery, readymade garments, pharmaceuticals and carpets, where the incidence of subcontracting is high. Some concerns also came with the private report that investment by foreign investors in the Indian equity markets sharply declined to $2.12 billion in the quarter ended June 30 from $6 billion in the preceding three months on global and domestic concerns.

However, some support came with Prime Minister Narendra Modi’s statement that the abolition of inter-state check posts after the implementation of GST has reduced time for movement of goods by 30 percent and saved thousands of crore of rupees. Meanwhile, markets regulator SEBI has relaxed norms for stake purchase in distressed listed companies by lenders, exempting them from making open offers for shareholders. The relaxation will be subject to certain conditions, including shareholders' approval of the stake acquisition by way of special resolution. The SEBI decision comes against the backdrop of the government and the Reserve Bank of India stepping up efforts to tackle the menace of bad loans, amounting to over Rs 8 lakh crore. Separately, a foreign brokerage report highlighted that India’s growth momentum will get stronger with revival in private investment cycle and real GDP growth is expected to average at about 7.4 percent over 2017 and 2018. It also termed as faulty the argument that a 7.5-8 percent real GDP growth in the next few years will still be lower than what was achieved in the boom period of 2006-2008. The medium-term outlook for the country looks exceedingly positive driven by supportive population dynamics, steadily rising aspirational middle class and a reforms oriented government.

On the global front, Asian markets closed mixed, as investors digested earnings releases from regional corporates. IMF has raised its growth outlook for China but the organization is doing so with a strong warning over growing debt in the world’s second-largest economy. European markets were trading in green with investors awaiting euro zone GDP figures which are expected to confirm the bloc’s economic growth was on track. The jobless rate in the UK unexpectedly dropped in June while wage inflation registered a stronger-than-expected increase. The Office for National Statistics said that the rate of unemployment fell to 4.4% in June, from the prior 4.5%.

The BSE Sensex ended at 31805.10, up by 356.07 points or 1.13% after trading in a range of 31399.35 and 31805.99. There were 22 stocks advancing against 9 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 1.24%, while Small cap index was up by 1.28%. (Provisional)

The top gaining sectoral indices on the BSE were FMCG up by 2.47%, Metal up by 1.76%, Auto up by 1.61%, Bankex up by 1.32% and Basic Materials up by 1.31%, while Capital Goods down by 0.07% and Utilities down by 0.02% were the only losing indices on BSE. (Provisional)

The top gainers on the Sensex were Cipla up by 3.44%, Tata Motors up by 3.35%, Hindustan Unilever up by 3.27%, ITC up by 2.90% and Tata Motors - DVR up by 2.87%. (Provisional)

On the flip side, NTPC down by 1.11%, Power Grid down by 0.94%, Asian Paints down by 0.94%, Bharti Airtel down by 0.63% and Dr. Reddy’s Lab down by 0.58% were the top losers. (Provisional)

Meanwhile, raising worries over imposition of 28% Goods and Services Tax (GST) rate on the leasing industry, Finance Industry Development Council (FIDC) has said that this rate is high for the Rs 5,500 crore capital goods leasing sector as compared to the earlier 5% to 15% tax rate and may slow the overall growth rate of the industry.

FIDC director general Mahesh Thakkar, while noting the impacts of higher GST rate, said that it leads to higher working capital requirement at any point of time along with increment in the cost of leasing equipment. In view of this, Thakkar suggested that the government should actively consider not bracketing the capital goods in the same GST bracket as luxury goods and sin goods.

Thakkar further pointed that in gross domestic capital formation, the leasing industry’s contribution is less than 2%, while on the global average; it is 10% and said that a lower GST rate will help increasing share of leasing in gross capital formation.

The CNX Nifty ended at 9900.65, up by 106.50 points or 1.09% after trading in a range of 9773.85 and 9903.95. There were 38 stocks advancing against 13 stocks declining on the index. (Provisional)

The top gainers on Nifty were Tech Mahindra up by 4.49%, Cipla up by 3.97%, Tata Motors up by 3.56%, Bank of Baroda up by 3.30% and Tata Power up by 3.14%. (Provisional)

On the flip side, Asian Paints down by 1.01%, Power Grid down by 0.99%, Yes Bank down by 0.91%, NTPC down by 0.87% and Ultratech Cement down by 0.72% were the top losers. (Provisional)

The European markets were trading in green; UK’s FTSE 100 increased 48.74 points or 0.66% to 7,432.59, Germany’s DAX increased 104.76 points or 0.86% to 12,281.80 and France’s CAC increased 53.69 points or 1.04% to 5,193.94.

Asian equity markets ended mixed on Wednesday as underlying sentiments turned cautious in the wake of expectations for a December rate hike from the Federal Reserve and the IMF’s warning that China’s credit growth is on a ‘dangerous trajectory’. Chinese shares ended lower after central bank data showed China’s new yuan loans fell sharply in July and broad money supply growth slowed. Further, Japanese shares ended slightly lower, dragged down by automakers on uncertainty about the fate of Mexico ahead of the first round of NAFTA negotiations.