Markets end lower on rise in inflation; Nifty slips below 10,200 mark

Indian equity benchmarks ended the lackluster day of trade in red terrain on Tuesday with frontline gauges breaching their crucial 33,000 (Sensex) and 10,200 (Sensex) levels, as traders remained concerned with retail inflation accelerating more than expected in October. Inflation quickened to 3.58 percent in the month, the fastest pace in seven months, from 3.28 percent increase in September. Consumer inflation rise was mainly due to an increase in prices of consumer food items. The inflation data showed that the Consumer Food Price Index (CFPI) - an indicator for food prices - also rose to 1.90% in October from 1.25% in September. Traders also remained cautious with rising crude prices and tax relief on some items under the Goods and Services Tax (GST) which is expected to threaten the government’s fiscal targets on back of possible dip in revenues. Giving hint of further rationalization of GST rates, Finance Minister Arun Jaitley has said that there is scope for further rationalization of GST rates and revenue buoyancy will decide the course of rationalization. The rising crude will also prevent the Reserve Bank of India from cutting interest rates any further.

Markets tried to recoup their losses in second half of trade but selling in dying hour of trade dragged markets near intraday lows, as sentiments turned down-beat after India’s inflation on wholesale level picked up in the month of October due to increase in prices of food and fuel products. According to the latest data released by the government, the wholesale price inflation (WPI) climbed to 3.59% in October 2017 from 2.60% in September 2017 and 1.27% during the corresponding month of the previous year. Build up inflation rate in the financial year so far was 2.03% compared to a build up rate of 3.53% in the corresponding period of the previous year. Investors failed to get any sense of relief with a private report that business confidence in the country during the ongoing quarter has improved on account of government measures, macroeconomic boost and festive season demand, among others. The index stood at 76.7 during October-December of 2017, an increase of 6.4% from the preceding three months. The index, however, fell 4.1% against the corresponding three months a year ago.

On the global front, European markets were trading mostly in green in early deals, as telecoms and tech companies supported shares, helping them steady above a seven-week low hit in the previous session. Asian markets ended mostly in red, as Chinese economic data disappointed and uncertainty lingered over US tax policy.

Back home, infrastructure related stocks edged lower despite ICRA in its report stating that even though many infrastructure players are still struggling with stressed balance sheets there has been an improvement in financial profile of firms, having exposure to airport and highways projects indicating a revival in the sector. The agency added that early signs of a revival of the infrastructure sector are evident with the improvement in the financial profile of players. Manufacturing sector stocks too ended in red despite Prime Minister Narendra Modi’s statement that the Indian government wants to make the country a Global Manufacturing Hub. He said, “We want to make India a global manufacturing hub and we want to make our youngsters job creators.” Meanwhile, Footwear retailer Khadim India made a dismal listing on the bourses today and ended the session with a cut of over 8%, the IPO was subscribed 1.90 times.

Finally, the BSE Sensex declined 91.69 points or 0.28% to 32,941.87, while the CNX Nifty was down by 38.35 points or 0.38% to 10,186.60.

The BSE Sensex touched a high and a low of 33,126.55 and 32,907.11, respectively and there were 11 stocks on gaining side as against 19 stocks on losing side on the index, while 1 stock remained unchanged.

The broader indices ended in red; the BSE Mid cap index shed 0.22%, while Small cap index was down by 0.18%.

The top gaining sectoral indices on the BSE were Realty up by 0.74%, Consumer Durables up by 0.64%, Auto up by 0.23%, Consumer Discretionary Goods & Services up by 0.15% and Energy was up by 0.04%, while Capital Goods down by 1.41%, Telecom down by 1.26%, PSU down by 0.92%, Oil & Gas down by 0.88% and TECK down by 0.72% were the top losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 1.96%, Axis Bank up by 1.57%, Bajaj Auto up by 1.37%, Mahindra & Mahindra up by 1.34% and Reliance Industries up by 1.26%. On the flip side, Larsen & Toubro down by 2.46%, Power Grid down by 2.20%, Asian Paints down by 1.77%, TCS down by 1.53% and ONGC down by 1.25% were the top losers.

Meanwhile, welcoming the move by Goods and Services Tax (GST) Council to levy 5 percent tax rate on all restaurants, both air-conditioned and non-AC, the domestic rating agency, ICRA in its latest report has said that the revision in rates for all restaurants is positive as it would bring down the cost of dining out, supporting footfalls and revenues at a time when most organized restaurants are struggling to grow demand.

The rating agency has stated that last week, the GST council slashed the tax rate of restaurants to a uniform 5 percent from 12 percent on non-AC restaurants and 18 percent on air-conditioned ones. It also pointed out that all these restaurants were also given an input tax credit (ITC) benefit, a facility which sets off tax paid on inputs against the final tax to be paid by consumers. Adding further, it mentioned that these restaurants, however, did not pass on the ITC benefit to customers and so the ITC facility is being withdrawn and a uniform 5 percent tax is levied on all restaurants without the distinction of AC or non-AC.

The report further highlighted that restaurants in starred-hotels that charge Rs 7,500 or more per day room tariff will be levied 18 per cent GST but ITC is allowed for them. It also noted that those restaurants in hotels charging less than Rs 7,500 room tariff will charge 5 per cent GST but will not get ITC. Besides, it said that as most major inputs for restaurants like grains (not packaged), vegetables, poultry and seafood are exempt from GST, the input credit advantage available for restaurants was negligible. It added that restaurants were also not passing on any benefit of input tax credit to the consumers under GST.

The CNX Nifty traded in a range of 10,248.00 and 10,175.55. There were 16 stocks in green as against 32 stocks in red, while 2 stocks remained unchanged on the index.

The top gainers on Nifty were Hero MotoCorp up by 2.10%, Axis Bank up by 1.91%, Reliance Industries up by 1.40%, Bajaj Auto up by 1.40% and Bajaj Finance up by 1.34%. On the flip side, Bharti Infratel down by 4.99%, Indian Oil Corporation down by 2.48%, Larsen & Toubro down by 2.38%, HPCL down by 2.27% and Vedanta down by 2.07% were the top losers.

European markets were trading mostly in green; Germany’s DAX rose 1.4 points or 0.01% to 13,075.82 and UK’s FTSE 100 was up by 11.28 points or 0.15% to 7,426.46, while France’s CAC was down by 0.53 points or 0.01% to 5,341.10.

Asian equity markets ended mostly lower on Tuesday as Chinese economic data disappointed and uncertainty lingered over US tax policy. Chinese shares ended lower after a slew of data showed the world's second-largest economy cooled further last month. China's industrial production and retail sales growth decelerated in October and property investment also cooled, as measures taken to curb excessive debt and factory pollution weighed on activity, data from the National Bureau of Statistic showed. Industrial output grew 6.2 percent year-on-year in October, down from the 6.6 percent expansion seen in September. Retail sales growth eased to 10 percent from 10.3 percent in the month, while fixed asset investment climbed 7.3 percent compared to 7.5 percent rise seen for the nine months ended September. Bank lending and property investment growth figures also disappointed investors. Meanwhile, Japanese shares closed on a flat note, with the benchmark Nikkei finishing marginally lower at 22,380.01.