Benchmarks trade flat with positive bias

Indian equity benchmarks continue to trade flat with positive bias in morning session in absence of any upside triggers and ahead of expiry of December futures and options contracts. The rupee drifted down against dollar due to month-end demand for the American currency from importers and banks. Sustained capital outflows and a sudden spike in crude oil prices globally too largely weighed on the forex market, though sluggish dollar overseas capped the losses. The sentiments were upbeat on report that the capital markets regulator, Securities and Exchange Board of India (SEBI) is likely to ease entry norms for FPIs willing to invest in the Indian markets. It may ease some rules, including expanding the eligible jurisdictions for registration by including countries with diplomatic tie-ups with India. Separately, Ravi P Sehgal, the new chairman of the EEPC India, the apex organization of the country’s engineering exporters said that the year 2018 is expected to be a good year for exports on back of global trade boom. The chairman added that as the IMF has outlined, that the global trade has grown at a faster clip than the overall world output growth, as the US, Euro zone, Japan and China are witnessing a resurgence in economic activity. All these markets are very important destinations for the Indian export basket, including the engineering goods, which are among the largest contributors to the country’s export consignments.

However, the upside was capped on report that India will borrow an additional Rs 500 billion ($7.79 billion) this fiscal year, a higher-than-expected figure that could lead to it breaching its fiscal deficit target for the first time in four years and hit the bond and equities markets. The additional borrowing could raise the fiscal deficit to 3.5% of GDP, against the stated target of 3.2%. Additionally, India’s crude oil import bill will likely swell 15% to $81 billion in the current fiscal year as prices soar amid output cuts led by OPEC and Russia. According to an estimate by the Oil Ministry, the volume of crude import would remain little changed at 213.5 million metric tonnes in 2017-18 but the value would jump to $81billion from $70 billion in the previous year. In rupee terms, the value is estimated to go up to Rs 5.2 lakh crore from Rs 4.7 lakh crore.

On the sectoral front, banking stocks remained under pressure, as the global rating agency Standard & Poor’s (S&P) on the basis of the economy and industry risk criteria has classified the Indian banking sector under ‘Group 5’ along with countries such as Italy, Spain, Ireland, the UAE and South Africa and has said that Banks’ asset quality is weak and has been deteriorating in the past four years. Select auto stocks were under pressure after the Lok Sabha approved a bill to hike cess on luxury vehicles from 15% to 25% with a view to enhance funds to compensate states for revenue loss following the rollout of GST. The Bill seeks to replace the Ordinance which was issued in September to give effect to the decision of the GST Council.

Traders were seen piling up position in Metal, Realty and Basic Materials stocks, while selling was witnessed in Auto, Bankex and Healthcare sector stocks. In scrip specific development, Monnet Ispat and Energy was trading in green on report that the Aion Capital-JSW Steel consortium, which last week emerged as the frontrunner to acquire bankrupt company, submitted a Rs 3,500-crore resolution plan that involves paying Rs 2,500 crore to lenders and an equity investment of Rs 1,000 crore, backed by a letter of comfort from ICICI Bank. The Rs 2,500-crore payment will be a one-time settlement for loans of Rs 10,000 crore, an effective haircut of 75 per cent, under the proposal.

On the global front, Asian markets were trading mostly in green. Japan’s factories and retailers posted better-than-expected growth in activity in November, while minutes from the central bank’s last policy meeting showed board members raising the prospect of reducing stimulus. Indonesia’s headline inflation rate is expected to have risen slightly in December, the first rise after five months of falls but stayed within the central bank’s target range. Back home, the BSE Sensex and NSE Nifty were trading above the psychological 33,900 and 10,500 levels respectively. The market breadth on BSE was positive in the ratio of 1325:1018, while 153 scrips remained unchanged.

The BSE Sensex is currently trading at 33915.21, up by 3.40 points or 0.01% after trading in a range of 33883.62 and 33975.05. There were 12 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.08%, while Small cap index was up by 0.27%.

The top gaining sectoral indices on the BSE were Metal up by 1.58%, Realty up by 1.02%, Basic Materials up by 0.76%, FMCG up by 0.47% and Power up by 0.27%, while Auto down by 0.18%, Bankex down by 0.15% and Healthcare down by 0.04% were the only losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 2.01%, Tata Steel up by 0.98%, Coal India up by 0.69%, Dr. Reddy’s Lab up by 0.60% and HDFC Bank up by 0.38%.

On the flip side, Sun Pharma down by 1.07%, Axis Bank down by 0.82%, Hero MotoCorp down by 0.80%, Yes Bank down by 0.56% and Bharti Airtel down by 0.51% were the top losers.

Meanwhile, the lower house of the parliament, Lok Sabha has given its approval to a bill to raise the maximum cess levied on luxury cars from 15% to 25%, a move aimed at enhancing central funds to compensate states for revenue loss due to the implementation of the goods and services tax (GST).

Lok Sabha passed the GST (Compensation to States) Amendment Bill, 2017, that sought to replace the ordinance issued in September following the GST Council’s recommendation at its 5 August meeting to increase the maximum rate at which compensation cess could be collected on certain automobiles. The ordinance had provided for a hike in upper limit of cess on mid-size, hybrid variants and luxury cars to 25%.

While the original ordinance that was issued by the council had multiple brackets, which resulted in Cess increasing 15 per cent to 17 or 20 per cent for cars and to 22 per cent for SUVs, the new GST Cess rates will now be even higher at 25 per cent. The Finance Minister Arun Jaitley said that the Cess on luxury cars has been increased in order to compensate states for revenue loss on account of implementation of the Goods and Services Tax. He also said that the GST Council, which comprises State finance ministers, meets every month and takes decision on rationalisation of taxes in the backdrop of revenue collection.

The CNX Nifty is currently trading at 10500.55, up by 9.80 points or 0.09% after trading in a range of 10486.25 and 10515.90. There were 27 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 3.31%, Hindustan Unilever up by 2.14%, Vedanta up by 1.76%, UPL up by 1.73% and Lupin up by 0.86%.

On the flip side, Hero MotoCorp down by 1.02%, Wipro down by 1.01%, Sun Pharma down by 1.00%, Axis Bank down by 0.65% and Ambuja Cement down by 0.57% were the top losers.

The Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 8.15 points or 0.46% to 1,779.91, Jakarta Composite increased 10.5 points or 0.17% to 6,287.66, Shanghai Composite increased 15.85 points or 0.48% to 3,291.63, KOSPI Index increased 21.55 points or 0.88% to 2,458.22, Taiwan Weighted increased 50.82 points or 0.48% to 10,537.49 and Hang Seng increased 167.24 points or 0.57% to 29,764.90.

On the other hand, Nikkei 225 decreased 5.14 points or 0.02% to 22,906.07.