Markets make gap-up opening; trade in fine fettle

Buoyed by firm regional cues, Indian equity benchmarks have made a gap-up opening and are trading in fine fettle in early deals with a gain of around half a percent. Traders reacted positively to the outcome of the crucial meeting of the Goods and Services Tax (GST) Council that took place on Saturday, where the council cut GST rate for over 40 items of mass consumption. Market participants shrugged off report that the investments in the domestic capital market through participatory notes (P-notes) slumped to a five-year low of Rs 1.35 lakh crore in July amid stringent norms put in place by Sebi.

On the global front, regional peers were trading mostly in green at this point of time, as the hurricane Irma’s force waned and the United Nations prepared to vote on tougher North Korean sanctions. The US markets once again made mostly a lower closing in the last session, booking another week of loses, as investors traded cautiously ahead of a potential missile test by North Korea and Hurricane Irma’s arrival on the Florida coast over the weekend.

Back home, auto stocks edged higher despite the GST Council raising the cess on motor vehicles--mid-size cars, large cars and sports utility vehicles-- by 2%, 5% and 7% respectively instead of whole 10% increase effected in the law, while keeping the overall tax incidence within 50%. Power stocks remained buzzing, as Fitch Ratings in its report has said that India may produce surplus power in the current financial year but sporadic outages continue to plague the country and 24 per cent households are yet to be electrified.

The BSE Sensex is currently trading at 31852.93, up by 165.41 points or 0.52% after trading in a range of 31797.89 and 31874.13. There were 22 stocks advancing against 9 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.66%, while Small cap index was up by 0.64%.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.82%, Oil & Gas up by 1.16%, Industrials up by 1.15%, Utilities up by 0.92% and Energy up by 0.84%, while Telecom down by 0.56% and Metal was down by 0.25% were the only losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 2.53%, Tata Motors - DVR up by 1.98%, Hindustan Unilever up by 1.60%, Bajaj Auto up by 1.19% and HDFC Bank up by 1.14%. On the flip side, Bharti Airtel down by 0.55%, ONGC down by 0.49%, SBI down by 0.42%, Power Grid down by 0.42% and Sun Pharma down by 0.38% were the top losers.

Meanwhile, the share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) have dropped to a five year low of Rs 1.35 lakh crore at the end of July, due to tough rules put in place by Securities and Exchange Board of India (SEBI). This was the lowest level since July 2012, when the cumulative value of such investments stood at Rs 129,586 crore. According to the SEBI data, total value of P-note investments in Indian markets including equity, debt and derivatives, at July-end, has declined to Rs 135,297 crore, from Rs 165,241 crore at the end of June. Prior to that, the total investment value through P-notes stood at Rs 180,718 crore in May-end and Rs 168,545 crore in April-end.

Of the total, P-note holdings in equities at July-end were at Rs 100,887 crore, while in debts and derivatives were at Rs 26,188 crore and Rs 8,222 crore respectively. The quantum of FPI investments via P-notes decreased to 4.4 percent in July from 5.7 percent in the preceding month. P-notes are issued by registered Foreign Portfolio Investors to overseas investors who wish to be a part of the Indian stock markets without registering themselves directly. They however need to go through a proper due diligence process.

The markets regulator SEBI, in July, had notified stricter P-notes norms stipulating a fee of $1,000 that would be levied on each instrument to check any misuse for channelising black money. Also, the regulator prohibited FPIs from issuing such notes where the underlying asset is a derivative, except those which are used for hedging purposes. The move follows after the board of SEBI in June approved a proposal in this regard. These measures follow a slew of other steps taken by the regulator in the recent past. Besides, in April, SEBI had barred resident Indians, NRIs and entities owned by them from making investment through P-notes. The decision was a part of efforts to strengthen the regulatory framework for P-notes, which have been long seen as being possibly misused for routing of black money from abroad.

The CNX Nifty is currently trading at 9982.75, up by 47.95 points or 0.48% after trading in a range of 9968.80 and 10000.55. There were 34 stocks advancing against 17 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 4.16%, Larsen & Toubro up by 2.78%, Tata Power up by 2.14%, Tata Motors - DVR up by 1.69% and Tech Mahindra up by 1.67%. On the flip side, Vedanta down by 1.18%, Hindalco down by 0.96%, Bharti Infratel down by 0.92%, Indiabulls Housing down by 0.74% and Sun Pharma down by 0.50% were the top losers.

Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI rose 2.22 points or 0.12% to 1,782.12, Shanghai Composite gained 4.32 points or 0.13% to 3,369.56, Jakarta Composite jumped 11.12 points or 0.19% to 5,868.24, KOSPI Index added 16.61 points or 0.71% to 2,360.33, Nikkei 225 surged 272.77 points or 1.42% to 19,547.59 and Hang Seng was up by 273.78 points or 0.99% to 27,942.25.

On the flip side, Taiwan Weighted was down by 36.04 points or 0.34% to 10,573.91.