Benchmarks end at fresh closing highs; Sensex conquers 35,200 mark

Extending their previous session’s jubilation, Indian equity benchmarks traded with traction through the session and settled at all time closing high levels. Profit booking in last leg of trade took markets off day’s high, but key gauges managed to end the session above their crucial 35,200 (Sensex) and 10,800 (Nifty) levels. Domestic bourses started the session with a huge gap on the up side, as traders took some encouragement with report that direct tax collections during the first nine-and-a-half months of the current fiscal have risen by 18.7 per cent to Rs 6.89 lakh crore. CBDT said that the collections till January 15, 2018 represent over 70 per cent of the Rs 9.8 lakh crore revenue target from direct taxes. Sentiments also got some support with Commerce and Industries Minister Suresh Prabhu expressing optimism that Indian economy is likely to grow to $5 trillion over the next eight to nine years, backed by government’s focus on bridging digital divide which is also helping people scale up their income.

Market participants continued to take some support from report that the government has reduced the additional borrowing requirement to Rs 20,000 crore for the financial year 2017-18. Prior to this, an additional loan of Rs 50,000 crore was estimated to be borrowed. However, traders booked some of their profit at higher levels in last leg of trade after the World Economic Forum (WEF) said in its annual Global Risks Report that the world will see risks related to environment, economy and international relations intensify this year with a majority of stakeholders expecting political or economic confrontations between major powers to worsen. Traders also remained watchful ahead of GST Council meet scheduled for the day which will consider a host of proposals to simplify procedure for filing of returns, registration of large entities and take stock of the GSTN’s readiness for e-way bill rollout from February 1. The GST Council is expected to consider a reduction in tax rates for some items, about 80 going by some reports, and the inclusion of real estate in its 24th meeting. But, markets get strong support near 35,200 (Sensex) and 10,800 (Nifty) levels and managed to end comfortably above those levels.

Positive opening in European counters too aided sentiments, following dovish comments by European Central Bank policymaker Ewald Nowotny who said that he did not rule out that monetary policy would still continue to be very accommodating for a long time. Asian stocks exhibited mixed trend, as traders remained on sidelines ahead of Chinese GDP data for direction.

Back home, banking stocks remained on buyers’ radar amid report that the government is considering a proposal to permit 100 percent FDI in private banks. However, telecom stocks remained under pressure despite report that industry saw a paltry 0.14 million net addition of subscribers during December, the lowest by the industry in the 2017 calendar year. Aviation stocks closed in red amid CRISIL’s Research report stating that rising crude, congestion are likely to cap domestic airline passenger traffic growth. The rating agency noted that domestic passenger traffic to grow 17-19% in fiscal 2018 compared with 22% in fiscal 2017, on account of rise in fares and airport congestion. In fiscal 2019, rating agency expects growth to moderate further to 15-17%, as fares are expected to feel the heat of higher crude oil prices.

Finally, the BSE Sensex surged 178.47 points or 0.51% to 35,260.29, while the CNX Nifty was up by 28.45 points or 0.26% to 10,817.00.

The BSE Sensex touched a high and a low of 35,507.36 and 35,166.44, respectively and there were 15 stocks on gaining side as against 16 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.69%, while Small cap index was down by 2.04%.

The few gaining sectoral indices on the BSE were FMCG up by 0.74%, Bankex up by 0.69%, Finance up by 0.56% and IT was up by 0.13%, while Realty down by 4.07%, Metal down by 2.87%, Telecom down by 2.63%, Basic Materials down by 2.12% and Utilities was down by 1.98% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 2.61%, HDFC Bank up by 2.15%, HDFC up by 1.99%, Mahindra & Mahindra up by 1.83% and Kotak Mahindra Bank up by 1.77%. On the flip side, Adani Ports &SEZ down by 4.32%, Tata Steel down by 2.89%, Coal India down by 2.81%, Tata Motors - DVR down by 1.51% and Sun Pharma down by 1.22% were the top losers.

Meanwhile, Confederation of Indian Industry (CII) has urged the government for inclusion of all petroleum products under the ambit of Goods and Services Tax (GST) at the earliest. It noted that as of now, petroleum products like crude oil, petrol, diesel, jet fuel or aviation turbine fuel (ATF) and natural gas are not included in GST, which kicked in from July 1, 2017. It also said that until this is done, C Forms should be continued to avoid high tax incidence on these products.

In accordance with the Industry body, though the understanding is that the previous VAT and CST rules would continue to apply to the excluded products, however, the related sectors continue to incur huge GST impact on all inputs without any set-off, as sale of crude oil and natural gas are outside the purview of GST and are subject to existing OIDA (Oil Industry Development Act) Cess, Central Sales Tax Act and State Value Added Tax. Besides, it noted that after GST rollout, credit on VAT paid on petroleum products including natural gas is not available and the amendment of the CST Act has significantly altered inter-state sale of the products. Therefore, it pointed out that post GST, there has been an increased tax cost on the products, which was not the intent of the government. It added that the central government vide Taxation Laws Amendment Act 2017, amended the definition of 'Goods' under the CST Act to include only crude petroleum, diesel, petrol, ATF, natural gas and alcoholic liquor for human consumption.

CII further stated that consequently, certain State Commercial Tax Departments have taken a narrow interpretation that the concessional rate of 2 percent against C Forms can be availed only if the specified goods are used for resale, or manufacture of the same goods and not for manufacture of any other goods, or in telecommunication, or mining, or generation of power. As a result, it noted that fertiliser companies are not eligible for C Form as the gas is used to manufacture urea and not for manufacture of natural gas. Likewise, it pointed out that automobile manufacturers are not eligible for C Form for inter-state purchase of diesel, petrol or natural gas, which they have to mandatorily fill in the tanks of new vehicles. It added that if purchasing dealer is not engaged in inter-state supply of goods (as defined under the CST Act), then he will not be liable for registration and thus not eligible for the issuance of Form-C which imposes an additional tax cost burden.

The CNX Nifty traded in a range of 10,887.50 and 10,782.40. There were 19 stocks in green as against 31 stocks in red on the index.

The top gainers on Nifty were ITC up by 2.99%, Indiabulls Housing Finance up by 2.64%, HDFC Bank up by 2.25%, UPL up by 2.21% and HDFC up by 1.97%. On the flip side, Bharti Infratel down by 6.00%, Hindalco down by 3.44%, Adani Ports & SEZ down by 3.37%, Tata Steel down by 3.06% and Vedanta down by 2.66% were the top losers.

European markets were trading mostly in green; France’s CAC increased 11.33 points or 0.21% to 5,505.32 and Germany’s DAX was up by 62.32 points or 0.47% to 13,246.28, while UK’s FTSE 100 was down by 26.41 points or 0.34% to 7,699.02.

Asian equity markets made a mixed closing on Thursday as investors awaited Chinese GDP data for direction. Chinese shares ended higher after data showed that China's property market remained largely stable in December despite tough purchase restrictions. Data released a while before revealed that the Chinese economy grew an annual 6.9 percent in 2017, up from 6.7 percent in 2016 and marking the first expansion in seven years. Industrial output accelerated slightly in December, while retail sales slowed and fixed-asset investment remained unchanged, separate reports showed. Meanwhile, Japanese shares ended lower after a report showed Japan's industrial production increased less than initially estimated in November.