Benchmarks continue weak trade; Telecom, Metal drag

Indian equity benchmarks continued their weak trade in the morning session on account of selling in frontline blue chip counters ahead of Gross Domestic Product (GDP) figures to be announced later in the day. The rupee opened lower against dollar amid the American currency gaining some lost ground against its major rivals overseas. Foreign Portfolio Investors pumped in Rs 218.58 crore in domestic equity markets on Wednesday with gross purchases and gross sales of Rs 4,878.97 crore and Rs 4,660.39 crore, respectively. Traders 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. The central bank said that the amount of counterfeit notes in the system is more than double of what the RBI had estimated in the past. The likely quantum of counterfeit notes in the system is estimated to be Rs 23,235 crore. In its Annual Report, the Reserve Bank of India (RBI) said that there are evidences of a bubble building up in Indian stock prices based on an econometric model, but there is no bubble yet since the current stock rally is driven by strong fundamentals.

Separately, a global financial service major enlightened that India’s economic growth is likely to remain soft and the GDP is expected to grow by 6% in April-June, down from 6.1% in the preceding quarter. The report added that higher private consumption and government spending is likely to be dulled by weak investment and exports growth over the quarter. Repercussions of an early budget and the newly implemented GST rates, receipts and rebates are likely to distort upcoming GDP readings. Investors took note that the government may be forced to put its state-run bank consolidation push on the back burner since at least a dozen of them are staring at a big hole in the balance sheet this fiscal year after RBI told them to get cracking on resolving as many as 50 bad loan accounts or initiate bankruptcy proceedings against them by December end. The market may remain volatile today as traders may roll over positions in the Futures & Options (F&O) segment from the near month i.e. August 2017 series to next month i.e. September 2017 series. The near month July 2017 derivatives contracts will expire today i.e. August 31, 2017.

Traders were seen piling up position in Oil & Gas, Energy and Consumer Durables stocks, while selling was witnessed in Telecom, Metal and TECK sector stocks. In scrip specific development, Tata Motors, Maruti Suzuki and Mahindra & Mahindra were under pressure after India’s top automakers expect a slump in demand following the cabinet on Wednesday approved an ordinance that will allow the cess on larger passenger cars and sports utility vehicles (SUVs) to be raised to as much as 25% from 15% under the GST regime.

On the global front, Asian markets were trading mostly in red. Growth in China’s manufacturing sector unexpectedly accelerated in August, suggesting the world’s second-largest economy is still expanding at a healthy clip despite rising financing costs and a cooling housing market. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 31,600 and 9,900 levels respectively. The market breadth on BSE was positive in the ratio of 1177:807, while 112 scrips remained unchanged.

The BSE Sensex is currently trading at 31566.33, down by 80.13 points or 0.25% after trading in a range of 31566.07 and 31722.41. There were 9 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.05%, while Small cap index was up by 0.30%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 0.83%, Energy up by 0.81%, Consumer Durables up by 0.75%, PSU up by 0.27% and Capital Goods up by 0.22%, while Telecom down by 0.90%, Metal down by 0.73%, TECK down by 0.64%, IT down by 0.54% and Healthcare down by 0.43% were the top losing indices on BSE.

The top gainers on the Sensex were Wipro up by 1.39%, Reliance Industries up by 0.95%, HDFC up by 0.20%, Hero MotoCorp up by 0.20% and ONGC up by 0.19%.

On the flip side, Infosys down by 1.05%, Dr. Reddy’s Lab down by 0.89%, ICICI Bank down by 0.88%, Bharti Airtel down by 0.87% and Tata Steel down by 0.86% were the top losers.

Meanwhile, the Union Cabinet has approved the 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.

Under the Goods and Services tax regime, all cars attract a basic GST of 28 per cent. Large cars with engine capacity greater than 1,500 cc and SUVs with length more than 4 metres & engine greater than 1,500 cc attracted additional cess of 15 per cent, following this several car makers had reduced prices of SUVs and large cars by Rs1.1 lakh to Rs 3.5 lakh, to pass on the benefit to customers after the GST rollout on 1 July, but now the cess has been increased by 10 per cent which will lead to increase in prices again.

Though, Finance Minister Arun Jaitley has made it clear that this was only an 'enabling Ordinance' and the decision to increase the cess would be left to the GST Council. The Council, chaired by Jaitley, will now meet on September 9 to take a call on the exact increase in the rate of the cess, as raising the cess will require an amendment to the Schedule of Section 8 of the GST (Compensation to a State) Act, 2017.

Earlier, a government notification cited the drop in tax incidence on the automobile industry before proposing an increase in the cess on large vehicles to 25% from the initially announced 15%.  This compensation cess, applicable not just to cars but also tobacco and coal, will be used to form a corpus for compensating the states which experience tax revenue loss post-GST.

The CNX Nifty is currently trading at 9866.60, down by 17.80 points or 0.18% after trading in a range of 9864.20 and 9905.70. There were 16 stocks advancing against 35 stocks declining on the index.

The top gainers on Nifty were Indian Oil Corp up by 1.60%, BPCL up by 1.55%, Wipro up by 1.48%, Reliance Industries up by 0.98% and Tech Mahindra up by 0.54%.

On the flip side, Bharti Infratel down by 2.11%, Bosch down by 1.53%, Vedanta down by 1.11%, Infosys down by 1.10% and ICICI Bank down by 0.97% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 161.15 points or 0.57% to 27,933.46, Shanghai Composite decreased 18.51 points or 0.55% to 3,345.12, Jakarta Composite decreased 11.99 points or 0.2% to 5,860.52, Taiwan Weighted decreased 10.51 points or 0.1% to 10,558.89 and KOSPI Index decreased 9.14 points or 0.39% to 2,363.15.

On the other hand, Nikkei 225 increased 149.15 points or 0.76% to 19,655.69.