Budget fails to cheer Dalal Street; Markets end marginally lower

Budget session turned out to be a quiet day of trade with Sensex and Nifty ending marginally lower after Finance Minister Arun Jaitley proposed a long-term capital gains tax. However, markets made firm start and traded with traction ahead of budget as traders took support with report that the Central Statistics Office revised the Gross Domestic Product (GDP) growth rate for 2015-16 to 8.2% from the earlier estimates of 8% and kept the 2016-17 growth unchanged at 7.1%. The real GDP or GDP at constant (2011-12) prices for the years 2016-17 and 2015-16 stands at Rs 121.96 lakh crore and Rs 113.86 lakh crore respectively, showing growth of 7.1% during 2016-17 and 8.2% during 2015-16. But, once the Finance Minister started announcing budget, markets witnessed a sharp sell-off and even breached their crucial 35,600 (Sensex) and 10,900 (Nifty) levels after Arun Jaitley proposed to levy long-term capital gains tax (LTCG) of 10% on gains exceeding Rs 100,000 from sale of equity shares. Moreover, finance minister Arun Jaitley revised the fiscal deficit for FY18 to 3.5% from 3.2% targeted earlier.

Selling proved short-lived and markets got strong support near those levels and pared all of their losses to back into green terrain. However, selling in last leg of trade dragged markets slightly in red, as investors remained concerned with report that India’s core sector output grew at a slower pace of 4.0% in December 2017, from 7.4% in November 2017, on the back of declining coal and crude oil output. According to the data released by the ministry of Commerce and Industry showed the combined Index of eight core industries stood at 129.1 in December, 2017, which was 4.0% higher compared to the index of December, 2016. Meanwhile, consumers are continuing to hold back on discretionary spending with categories such as television, home appliances, fashion, lifestyle and apparel posting poor sales in the October-December quarter, with no recovery in sight in January as well, despite almost all brands and retailers running end-of-season and Republic Day sales. 

On the global front, European markets were trading in green in early deals following three days of losses, supported by a flurry of mostly positive results and gains by banks. The euro zone’s booming manufacturing industry raced into 2018, churning out goods last month at one of the fastest paces in over 20 years, a survey showed, suggesting the economic recovery still has momentum. Asian markets exhibited mixed trend after the US Federal Reserve left its key rate unchanged, as widely expected, but set the stage for a rate hike at its next meeting in March.

Back home, Aviation stocks flied higher as govt planning to expand airport capacity by 5 times to 1 billion trips a year. Most of the Healthcare stocks edged higher as govt allocated Rs 1,200 crore for Specialised Health Wellness Centre. Railway stocks showed mixed reactions as Finance Minister Arun Jaitley’s proposal to increase railway capex failed to enthuse investors. The minister proposed to increase railway capex to Rs 1.48 lakh crore in FY19, up 13 per cent over Rs 1.31 lakh crore for FY18. Textile companies too failed to draw solace with FM Arun Jaitley’s quantum of fund allocation to the textile sector in the Union Budget speech 2018-19. The finance minister announced that the government will allocate Rs 7,148 crore for the sector.

Finally, the BSE Sensex declined 58.36 points or 0.16% to 35,906.66, while the CNX Nifty was down by 10.80 points or 0.10% to 11,016.90.

The BSE Sensex touched a high and a low of 36,256.83 and 35,501.74, respectively and there were 14 stocks on gaining side as against 17 stocks on losing side on the index.

The broader indices ended mixed; the BSE Mid cap index declined 93.30 points, while Small cap index was up by 0.63 points.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.57%, Auto up by 0.67%, FMCG up by 0.64%, Industrials up by 0.57% and Basic Materials was up by 0.42%, while Consumer Durables down by 1.78%, Energy down by 1.55%, Healthcare down by 1.38%, Oil & Gas down by 1.28% and PSU was down by 1.24% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 4.44%, Larsen & Toubro up by 2.77%, Indusind Bank up by 2.44%, Bajaj Auto up by 2.13% and Asian Paints up by 1.89%. On the flip side, ONGC down by 4.06%, Sun Pharma down by 3.99%, Dr. Reddy’s Lab down by 3.07%, SBI down by 2.30% and ICICI Bank down by 2.04% were the top losers.

Meanwhile, domestic credit rating agency, ICRA in its latest report has said that domestic cement demand continued to remain weak in the ongoing financial year so far and is likely to register a modest growth of around 2 percent in the fiscal year 2017-18, because of factors such as weak real estate activity, sand shortage and Goods and services tax (GST) implementation issues. Besides, it indicated that the cement off-take continued to be weak in November 2017 and showed only a marginal increase of 0.5% month-on-month basis at 24.1 million metric tonne (MMT).

Though, the rating agency highlighted that cement demand registered year-on-year growth of 17.3 percent in November 2017, largely due to the base effect arising out of low production of 20.5 MMT in November 2016, the month in which demonetisation was announced. It also showed that during April-November, cement production witnessed a marginal growth of 0.6 percent at 190.0 MMT as compared to 188.8 MMT in the corresponding period. It noted that production declined 3.3 percent in June quarter and by 0.4 percent in September quarter year-on-year. It added that during the first quarter, demand was adversely impacted due to various local issues across regions.

According to the report, cement demand in the North, especially in Uttar Pradesh and Punjab was affected due to sand shortage and labour unavailability, while in the west, the implementation of the Real Estate Regulatory Authority (RERA) Bill resulted in slowing down of the construction activity. Besides, it mentioned that in south, Tamil Nadu and Kerala were worst hit as demand was affected due to sand shortage, drought (impacting rural offtake) and weak housing activity. The report stated that a pick-up in the housing segment - mainly affordable and rural housing, and infrastructure segment, mostly road and irrigation projects, is likely to help improve the cement demand growth to 4-5 percent in 2018-19.

The CNX Nifty traded in a range of 11,117.35 and 10,878.80. There were 27 stocks in green as against 23 stocks in red on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 4.97%, Eicher Motors up by 4.78%, Bajaj Finance up by 3.88%, Larsen & Toubro up by 2.93% and Bajaj Auto up by 2.41%. On the flip side, Sun Pharma down by 4.22%, ONGC down by 4.93%, Dr. Reddy’s Lab down by 2.94%, Aurobindo Pharma down by 2.91% and Lupin down by 2.60% were the top losers.

European markets were trading in green; UK’s FTSE 100 gained 5.89 points or 0.08% to 7,539.44, France’s CAC increased 23.48 points or 0.43% to 5,505.41 and Germany’s DAX was up by 50.62 points or 0.38% to 13,240.10.

Asian equity markets ended mixed on Thursday after the US Federal Reserve left its key rate unchanged, as widely expected, but set the stage for a rate hike at its next meeting in March. Japanese shares snapped a six-day losing streak as the yen weakened against the dollar and a survey showed Japan's manufacturing sector expanded at a faster rate in January. Chinese shares fell as investors dumped firms which are expected to report weak 2017 earnings and took profits ahead of the upcoming long Lunar New Year holidays. China Caixin manufacturing data matched expectations, helping limit losses across the region. The manufacturing sector in China continued to expand in January, and at a steady pace, the latest survey from Caixin showed with a PMI score of 51.5. That was in line with expectations and unchanged from the December reading. Meanwhile, the Malaysian market was closed for the Federal Territory Day.