Benchmarks eke out slender gains

Indian equity benchmarks ended the volatile day of trade with marginal gains on Monday, as traders remained on sidelines ahead of July-September quarter earnings, slated to be released this week. Soon after a cautious start, markets gained momentum and regained their crucial 10,000 (Nifty) and 31,900 (Sensex) levels, as traders took encouragement with the GST Council on Friday announcing a slew of decisions to reduce compliance burden, including the eventual setting up of an e-wallet for input tax credits for exporters, and the option for small businesses to file returns and pay taxes only once a quarter. The GST Council also reduced the tax rates on 27 items. Some support also came with Finance Minister Arun Jaitley stating that government’s initiatives like Swachh Bharat, Goods and Services Tax (GST) and demonetisation are having desired impact, with the latter two resulting in increasing tax compliance and squeezing quantum of cash in the economy. Traders also took note of Revenue Secretary Hasmukh Adhia’s statement that the government will clear pending GST refunds of exporters by November-end and over the next six months no tax will be levied on exports as the Council has decided to revert to the pre-GST era.

However, traders booked profit at higher levels and markets ended the session marginally in green terrain. Gains remained capped on geopolitical concern after report emerged that North Korea to mark a major anniversary this week may do another missile test. Also, as though the GST breather given to small and medium enterprises (SMEs) and exporters will address their liquidity issues, large corporates are disappointed as the GST Council didn't address many key issues such as anti-profiteering laws, transition credit issues and denial of certain input credit.

On the global front, European markets made a weak start on Monday. Britain’s statistics office said that it had underestimated the pace of growth in costs in the labor market, one of the pieces of data that the Bank of England is looking at as it considers whether to raise interest rates next month. Asian markets closed mostly higher, as investors digested the release of China Caixin services PMI.

Back home, Jewellery stocks remained buzzing after the Government withdrew its GST notification on gems and jewellery. Permanent Account Number (PAN) card will no longer be mandatory on the purchase of jewellery for over Rs 50,000. Select Movies & Entertainment stocks was in focus in today’s trade on report that the Indian film industry is expected to grow at 11.5% year-on-year, reaching total gross realization of Rs 23,800 crore ($3.7 billion) by 2020. Stocks related to oil & gas sector edged lower despite report that the Prime Minister Narendra Modi will hold a high-profile meeting with CEOs of foreign and Indian companies, as the government seeks big-ticket investment in its vast, rapidly growing energy market.

Finally, the BSE Sensex gained 32.67 points or 0.10% to 31,846.89, while the CNX Nifty was up by 9.05 points or 0.09% to 9,988.75.

The BSE Sensex touched a high and a low of 31,935.63 and 31,781.75, respectively and there were 15 stocks on gaining side as against 16 stocks on losing side on the index.

The broader indices ended mixed; the BSE Mid cap index slipped 0.04% however, Small cap index was up by 0.62%.

The top gaining sectoral indices on the BSE were Realty up by 2.20%, Consumer Durables up by 0.90%, FMCG up by 0.66%, IT up by 0.39% and Consumer Disc up by 0.34%, while Oil & Gas down by 1.01%, Utilities down by 0.67%, Energy down by 0.66%, Power down by 0.59% and Telecom down by 0.54% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 1.81%, Hindustan Unilever up by 1.37%, Dr. Reddy’s Lab up by 1.34%, Kotak Mahindra Bank up by 1.34% and Adani Ports & SEZ up by 1.16%. On the flip side, Power Grid down by 1.68%, ONGC down by 1.58%, Reliance Industries down by 0.73%, NTPC down by 0.68% and Bajaj Auto down by 0.58% were the top losers.

Meanwhile, the Fitch group company, BMI Research in its latest report has said that the key policy rates may remain unchanged for rest of the fiscal year 2017-18, as the Reserve Bank of India (RBI) is likely to adopt a 'wait and see' approach due to rising inflation and downside pressure on the rupee. As per the report, retail Inflation, measured by consumer price inflation (CPI) is likely to head higher over the coming months, mainly due to rising food and housing prices.

The report has said that expectations of an economic recovery suggest that the RBI is likely to continue a ‘wait-and-see’ approach towards supporting growth, while rising inflation and a weakening rupee suggest that there is little room to loose monetary policy further. It also pointed out that the central bank is expected to keep interest rates on hold over the coming months in an effort to maintain the country's real yield advantage to prevent significant currency weakness due to capital outflows. It indicated that the rupee is currently hovering around Rs 65 level against the US dollar.

BMI Research has further stated that the government’s plans for fiscal spending to support economic growth along with farm loan waivers at the state level, which could top Rs 3.2 trillion, pose significant inflationary risks that are likely to prevent the central bank from adopting a looser monetary policy stance. Besides, the RBI left its benchmark repo rate steady at 6% in its latest monetary policy meeting.

The CNX Nifty traded in a range of 10,015.75 and 9,959.45. There were 27 stocks in green as against 23 stocks in red on the index.

The top gainers on Nifty were Yes Bank up by 1.69%, Tech Mahindra up by 1.50%, Coal India up by 1.46%, Dr. Reddy’s Lab up by 1.43% and HUL up by 1.26%. On the flip side, Aurobindo Pharma down by 2.21%, ONGC down by 1.75%, Power Grid down by 1.73%, GAIL India down by 1.60% and BPCL down by 1.57% were the top losers.

European markets were trading mostly in red; UK’s FTSE 100 decreased 9.5 points or 0.13% to 7,513.37 and France’s CAC was down by 0.3 points or 0.01% to 5,359.60, while, Germany’s DAX increased 6.55 points or 0.05% to 12,962.49.

Asian equity markets ended mostly higher on Monday, with Chinese markets leading the surge as traders returned to their desks after the week-long ‘Golden Week’ holidays. Meanwhile, China’s major stock indexes touched 21-month highs following a week-long holiday, boosted by a coming cut in banks’ reserve requirement ratio and last week’s stellar performance in global equity markets. Though, Hong Kong stocks dipped after hitting near 10-year highs last week, as investors took profits in property and financial shares in the wake of a disappointing China services survey and worries on North Korea curbed risk appetites. Trading activity remained light across the region due to holidays in Japan, South Korea and Taiwan.