Benchmarks manage to eke out slender gains

Indian equity benchmarks managed to end the extremely volatile day of trade with modest gains on Wednesday, with frontline gauges holding their crucial 11,050 (nifty) and 36,100 (Sensex) levels. Markets altered between green and red throughout the session and somehow managed to end with slender gains, as traders took some encouragement with former Niti Aayog vice chairman Arvind Panagariya’s statement that India has the potential to achieve 10% growth rate, but it needs major reforms in areas in labour laws and land acquisition. He said Indian economy grew 7.5% in the first three years of the Narandra Modi government, but two major reforms - demonetisation and goods and services tax - brought the growth rate down a little. Some support also came with Prime Minister Narendra Modi showcasing India’s growth story to world leaders and called out for tackling the three major challenges the world faces currently - climate change, terrorism and threat to globalisation. Meanwhile, expressing confidence about the economy’s potential, Finance Minister Arun Jaitley hoped that it would become the third largest economy over the next 25 years. He said, “We have moved from the seventh to the fifth largest economy. Unquestionably in the next 25 years India would perhaps be the largest economy”.

However, gains remained capped as traders remained mostly on sidelines ahead of January derivatives expiry on Thursday and ahead of the Union Budget next week. Traders also remained concerned with global rating agency, S&P ratings’ latest report ‘APAC Economic Snapshots, January 2018’, which stated that overall economic risks in India remain low, but risks from higher oil prices have reappeared. International oil prices have been rising which has also led to increased prices of petrol and diesel and a majority of India’s import bill stem from crude oil purchases.

Weak opening in European markets too dampened domestic sentiments with investors focusing on a batch of euro zone economic reports set to be released. The jobless rate in the UK was unchanged as expected at a prior 42-year low in November, while wage inflation excluding bonuses unexpectedly ticket higher. Asian markets exhibited mixed trend on news of US tariffs on washing machines and sonar panels sparked fears of a global trade war.

Back home, shares of public sector banks (PSBs) ended higher for the second straight day on expectations of PSU recap bond allocation to happen before the Budget. However, telecom stocks like Bharti Airtel and Idea Cellular closed in red, a day after Reliance Jio offered 500 Mb more data at the same price points, underlining the continuing tariff war which will hurt average revenue per user further. The industry, already plagued by tariff wars and debt of Rs 5 lakh crore has had another poor quarter. Shares of liquor companies remained under pressure with United Spirits falling around 7% on BSE in intra-day trade after reporting disappointing set of numbers for the quarter-ending December 2017 (Q3FY18).

Finally, the BSE Sensex gained 21.66 points or 0.06% to 36,161.64, while the CNX Nifty was up by 2.30 points or 0.02% to 11,086.00.

The BSE Sensex touched a high and a low of 36,268.19 and 36,036.51, respectively and there were 17 stocks on gaining side as against 13 stocks on losing side, while 1 stock remained unchanged on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.57%, while Small cap index was down by 0.90%.

The top gaining sectoral indices on the BSE were IT up by 1.53%, PSU up by 1.13%, FMCG up by 0.54%, TECK up by 0.49% and Healthcare was up by 0.24%, while Telecom down by 3.54%, Consumer Durables down by 2.08%, Metal down by 1.50%, Basic Materials down by 1.36% and Industrials was down by 0.89% were the top losing indices on BSE.

The top gainers on the Sensex were SBI up by 3.62%, Adani Ports & SEZ up by 2.46%, TCS up by 2.30%, ITC up by 1.88% and Yes Bank up by 1.66%. On the flip side, Bharti Airtel down by 6.51%, Tata Motors down by 3.46%, Tata Motors - DVR down by 3.02%, ICICI Bank down by 2.60% and Tata Steel down by 2.13% were the top losers.

Meanwhile, the Vice President M Venkaiah Naidu has said that the increasing middle class would be the main driver of India's gross domestic product (GDP) growth in the coming years. He also indicated that with the large population of India, about 65 percent below the age of 35, the need of the hour of is to take full advantage of this demographic number by creating adequate job opportunities for the young population. Besides, he said that merely turning out lakhs of students with degrees is not enough and added that they must be taught life skills.

Naidu has stated that while India must improve its tax-to-GDP ratio and curb tax evasion, there should be no needless harassment of tax-payers. He also said that the country needs to ramp up its tax-to-GDP ratio, currently at 16.6 percent, to fund a modern, twenty-first century government which can offer basic public facilities and social security to its citizens. Regarding the government’s ambitious Rs 2.11 lakh crore bank recapitalisation plan, he believed that such move is expected to improve the credit growth and private sector investment. He also noted that introduction of the Insolvency and Bankruptcy Code has strengthened creditors’ rights.

Vice president further highlighted that one of the major objectives of both demonetisation and Goods and Services Tax (GST) regime was to increase tax compliance. He pointed out that the expansion of formal economy will lead to increased tax collection and higher revenues, which will be used to accelerate development by building essential infrastructure. He noted that while tax evasion has to be dealt with sternly, it should be ensured that there is no unnecessary harassment of tax payers by overzealous officials. He added that the GST has changed the face of the indirect tax regime as it brings one tax instead of multiplicity of taxes.

The CNX Nifty traded in a range of 11,110.10 and 11,046.15. There were 28 stocks in green as against 22 stocks in red on the index.

The top gainers on Nifty were SBI up by 3.88%, GAIL India up by 2.89%, Tech Mahindra up by 2.55%, Lupin up by 2.52% and HCL Tech up by 2.48%. On the flip side, Bharti Airtel down by 7.22%, Tata Motors down by 3.36%, Hindalco down by 2.60%, ICICI Bank down by 2.51% and Eicher Motors down by 2.48% were the top losers.

European markets were trading in red; UK’s FTSE 100 decreased 23.48 points or 0.3% to 7,708.35, France’s CAC shed 4.05 points or 0.07% to 5,531.21 and Germany’s DAX was down by 3.96 points or 0.03% to 13,555.64.

Asian equity markets ended mixed on Wednesday as news of US tariffs on washing machines and sonar panels sparked fears of a global trade war. Chinese shares hit fresh two-year highs on optimism about growth in 2018. Meanwhile, Japanese shares ended lower as the dollar dropped below the 110 yen threshold for the first time in four months, triggering selling in exporters. Weaker- than- expected Japanese trade data for December also dented sentiments.