Benchmarks end in green ahead of Gujarat exit polls

Indian equity benchmarks ended the choppy day of trade in green terrain, as traders opted to buy beaten down but fundamentally strong stocks in dying hour of trade ahead of exit poll results of Gujarat election. After a cautious start, markets entered into red terrain and traded cautiously as the Federal Reserve delivered a much-anticipated interest rate hike but flagged caution about inflation, tempering expectations for future tightening, which weighed on the dollar and Treasury yields. Traders also remained concerned with the Reserve Bank of India (RBI) data showing that India’s current account deficit (CAD) widened to 1.2 percent of GDP or $ 7.2 billion in July-September, from 0.6 percent of GDP or $ 3.4 billion reported in the same period a year ago. Meanwhile, the trade deficit widened to $ 32.8 billion in the previous quarter from $ 25.6 billion a year ago.

Markets extended losses and hit intraday lows to breach their crucial 32,900 (Sensex) and 10,150 (Nifty) levels in noon deals after India’s annual rate of inflation based on wholesale prices rose in the month of November, due to increasing prices of food and fuel products. The WPI surged to 3.93% in November 2017 from 3.59% in October 2017 and 1.82% during the corresponding month of the previous year. Build up inflation rate in the financial year so far was 2.74% compared to a build up rate of 3.90% in the corresponding period of the previous year. However, strong recovery in dying hour of trade took markets into green terrain as traders went for bargain hunting ahead of Gujarat exit poll results to be released tomorrow. Traders also took some support with reports that the government will hold consultations with the RBI to work out a mechanism to bring down merchant discount rates (MDR) that have gone up to 0.90% recently from 0.25% of transaction value. Some support also came with a private report stating that India’s economic growth has bottomed out and the GDP growth will recover further to 7% over the next few quarters.

On the global front, European markets were trading in red in early deals, as investors reacted negatively to the US Federal Reserve’s decision to raise interest rates. Weakness in bank stocks dragged European shares lower as the financial sector caught the cold from US rate hike. Asian markets ended mostly in red. China’s central bank nudged up money market rates as authorities sought to defuse financial risks without imperiling the economy, a balancing act that it has managed successfully so far this year as activity remained broadly steady.

Back home, banking stocks remained buzzing on report that the finance ministry has held meetings with the top brass of about half-dozen state-run banks as part of efforts to gauge the capital requirements of the lenders. The paper stocks remained in focus on report that paper and paperboard imports touched an all-time of 10.5 lakh tonnes in the first half of this fiscal, up 60 per cent from 6.5 lakh tonnes logged in the same period last year. In scrip specific developments, Yes Bank edged higher on entering into partnership with FundsIndia, while Tata Communications rings loud on getting nod for scheme of arrangement. Lupin rose on receiving USFDA’s approval for generic Safyral Tablets.

Finally, the BSE Sensex surged 193.66 points or 0.59% to 33,246.70, while the CNX Nifty was up by 59.15 points or 0.58% to 10,252.10.

The BSE Sensex touched a high and a low of 33,321.52 and 32,886.93, respectively and there were 27 stocks on gaining side as against 4 stocks on losing side on the index.

The broader indices ended mixed; the BSE Mid cap index gained 0.09%, while Small cap index was down by 0.32%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 0.99%, Energy up by 0.91%, Telecom up by 0.73%, FMCG up by 0.69% and Bankex was up by 0.67%, while Consumer Durables down by 0.61%, Industrials down by 0.04%, IT down by 0.04% and Utilities was down by 0.03% were the few losing indices on BSE.

The top gainers on the Sensex were Dr. Reddy’s Lab up by 2.34%, Cipla up by 2.22%, ITC up by 1.87%, Mahindra & Mahindra up by 1.36% and Axis Bank up by 1.24%. On the flip side, TCS down by 2.62%, Sun Pharma down by 0.48%, Power Grid Corporation down by 0.37% and Larsen & Toubro down by 0.01% were the top losers.

Meanwhile, the All India Solar Industries Association (AISIA) has stated that overall cost of solar project has witnessed 10-12% rise, led by implementation of goods and services tax (GST) regime. While urging the government to remove uncertainty, it said that solar power cost will see an upward escalation under the new tax regime. Besides, it pointed out that while solar power generating systems fall under 5 percent tax bracket, procurement and supply of equipment like module mounting structures, trackers, inverters, transformers and cables are being charged the GST at varying rates.

The association further said that the equipments are charged GST as applicable on individual items rather than treating them as a part of solar power generating system. It also said that solar modules were exempt from all duties in the pre-GST regime but since July 1 they are being charged 5 percent GST. It also indicated that inverters, cables and transformers were levied by 2 percent central sales tax and excise was exempt but post GST they are charged 5-8 percent tax. It added that likewise, the tax incidence on services and civil work has risen to 18 percent from 15 per cent and 6 percent respectively previously.

AISIA has said that presently, the power developers cannot avail the benefit of GST for the electricity produced leading to a detrimental effect towards achieving target of National Solar Mission. Under National Solar Mission, the target for setting up solar capacity increased from 20 GW to 100 GW by 2021-22. Further, it suggested re-introduction of MNRE-certification or self-certification supported by an undertaking that such equipment is required for the setting up of a solar power generating system. It stated that since solar power generating systems are already charged to 5 percent GST, there should be no GST on such equipments which are part and parcel of the generating system. It also feels that an urgent intervention is required in an effort to maintain the cost of solar power low and incentivise renewable energy deployment.

The CNX Nifty traded in a range of 10,276.10 and 10,141.55. There were 40 stocks in green as against 8 stocks in red, while 2 stocks remained unchanged on the index.

The top gainers on Nifty were HPCL up by 3.26%, Cipla up by 2.40%, Dr. Reddy’s Lab up by 2.35%, Tech Mahindra up by 2.07% and IOC up by 2.06%. On the flip side, TCS down by 2.67%, UPL India down by 0.82%, GAIL down by 0.77%, Aurobindo Pharma down by 0.56% and Sun Pharma down by 0.53% were the top losers.

The European markets were trading in red; Germany’s DAX decreased 78.12 points or 0.6% to 13,047.52, France’s CAC shed 24.82 points or 0.46% to 5,374.63 and UK’s FTSE 100 was down by 11.68 points or 0.16% to 7,484.83.

Asian equity markets ended mostly in red on Thursday, with investors digesting a slew of economic reports from the region and reacting to a rate hike in the US. Although most of the markets in the region started off on a slightly positive note, many of these gave up early gains. On Wednesday, the US Federal Reserve had hiked the benchmark interest rate by 0.25%, from 1.25% and maintained the earlier forecast for just three 1/4- point rate hike in 2018. The Federal Open Market Committee raised the GDP estimate from 2.5% for 2018 from an earlier projection of 2.1%, although it projected growth to be 2.1% in 2019 and 2% in the subsequent year. However, inflation is projected to remain shy of the Fed's 2% goal for another year. Amid concerns about inflation, the policymakers said there is no reason to accelerate the expected pace of rate increases. Chinese shares ended lower, after the country’s central bank nudged up money market rate following the widely expected US rate hike, and as mixed data reinforced signs of a modest slowdown in the Asian economic powerhouse. China’s central bank lifted money market rates as authorities sought to defuse financial risks without imperilling the economy. Further, Japanese shares ended lower, as banks and insurer shares weakened in line with lower interest rates while telecommunications shares withered on news that online retailer Rakuten plans to enter the mobile carrier market.