Benchmarks make cautious start ahead of GDP numbers

Indian equity benchmarks have made a cautious start and are trading in red terrain in early deals on the F&O series expiry day, as traders remained on sidelines ahead of Gross Domestic Product (GDP) figures to be announced later in the day. Traders also remained concerned with assessment of RBI in its annual report that fiscal consolidation may come under threat at the central and state levels due to the immediate effects of the goods and service tax (GST), loan waivers and pay revisions, putting pressure on the overall growth matrix. However, losses remained capped as traders are getting some comfort with Finance Minister Arun Jaitley’s statement that the Goods and Services Tax (GST) is bound to impact the direct tax collection as well due to the increased detection technology and greater compliance. The Finance Minister also said that even before GST was rolled out, the impact of demonetisation has expanded the number of assessees under the personal income tax.

On the global front, Asian markets were trading mostly in red at this point of time. However, Japanese market was up despite its industrial production slowing in July from June, as continued strong exports and a cheap yen indicated that the phase is temporary. The US markets extended their gains in the last session, some upbeat U.S. economic data, including a report showing a jump in private sector employment supported the markets.

Back home, auto stocks remained buzzing with the Union Cabinet’s approval of promulgation of an Ordinance that would allow the GST Council to hike the maximum rate of compensation cess on large and luxury vehicles to 25 per cent from the current cap of 15 per cent. Meanwhile, the market breadth indicating the overall health of the market was strong, with 1064 shares gaining and 674 shares declining, while a total of 80 shares were unchanged.

The BSE Sensex is currently trading at 31593.97, down by 52.49 points or 0.17% after trading in a range of 31566.20 and 31722.41. There were 10 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.19%, while Small cap index was up by 0.28%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.10%, Energy up by 1.08%, Consumer Durables up by 0.80%, Capital Goods up by 0.52% and PSU was up by 0.49%, while Telecom down by 0.82%, TECK down by 0.42%, FMCG down by 0.33%, IT down by 0.33% and Healthcare was down by 0.30% were the top losing indices on BSE.

The top gainers on the Sensex were Wipro up by 1.35%, Reliance Industries up by 1.19%, Adani Ports & SEZ up by 0.60%, ONGC up by 0.57% and Power Grid Corporation up by 0.35%. On the flip side, NTPC down by 1.01%, Dr. Reddy’s Lab down by 1.00%, Bharti Airtel down by 0.84%, Infosys down by 0.78% and Sun Pharma down by 0.68% were the top losers.

Meanwhile, ahead of the release of the gross domestic product (GDP) data for the first quarter of 2017-18, the Reserve Bank of India (RBI) in its annual report for 2016-17 has stated that with risks evenly balanced, the economic activity as measured by Gross Value Added (GVA) is expected to expand by 7.3% in the fiscal year 2017-18, up from 6.6% in 2016-17. It said that favorable domestic conditions are mainly expected to enable a quicker pace of overall economic activity during the year. It also expects the headline inflation to be in the range of 2-3.5% in the first half of 2017-18 and 3.5-4.5% in the later half.

The annual report said that continuing re-monetisation should enable a pickup in discretionary consumer spending, especially in cash-intensive segments. Government spending continued to be robust, cushioning the impact of a slowdown in other constituents. It also said that expected normal monsoon and the resultant replenishment of reservoirs, policy initiatives of the government such as hike in minimum support prices (MSPs) and increasing crop insurance coverage are likely to help in boosting crop production and supporting rural demand.

The central bank further said that in the fiscal sphere, while the gains to growth, efficiency and tax buoyancy over the medium term from goods and services tax (GST) are unequivocally recognised, near- term uncertainties with regard to revenue mobilisation there from - which could impact fiscal consolidation at both centre and state levels - cannot be ruled out as this fundamental reform gains pan-India traction. On the banking sector the report said, as of end-March 2017, 12.1% of the advances of the banking system were stressed. A sharp increase in provisioning for NPAs adversely impacted profitability of banks, with the public sector banks as a whole continuing to incur net losses during 2016-17.

The RBI also said that farm loan waivers by state governments have potential to crowd out corporate borrowing if financed through state debt issuance. As per initial estimates, the total loan waivers announced during 2017-18 (up to August 2, 2017) amount around 0.4% of the GDP. It added that depending on possible cutback under other expenditure heads, this may result in an increase in the consolidated GFD-GDP ratio of states by about 20-40 basis points.

The CNX Nifty is currently trading at 9875.25, down by 9.15 points or 0.09% after trading in a range of 9864.20 and 9905.70. There were 22 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were BPCL up by 2.20%, Wipro up by 1.44%, Tech Mahindra up by 1.21%, Indian Oil Corporation up by 1.18% and Reliance Industries up by 1.16%. On the flip side, Bharti Infratel down by 2.07%, Bosch down by 1.17%, Dr. Reddy’s Lab down by 0.98%, NTPC down by 0.95% and Sun Pharma down by 0.94% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 164.71 points or 0.59% to 27,929.90, Shanghai Composite shed 21.79 points or 0.65% to 3,341.83, Taiwan Weighted slipped 13.72 points or 0.13% to 10,555.68, Jakarta Composite dropped 10.01 points or 0.17% to 5,862.50 and KOSPI Index was down by 8.51 points or 0.36% to 2,363.78.

On the flip side, Nikkei 225 was up by 165.12 points or 0.85% to 19,671.66.