Post Session: Quick Review

Indian equity benchmarks witnessed major sell-off in today’s trade with cut of around two and half percent. Nifty closed below 10,750 mark and Sensex lost over 800 points. The equity benchmarks witnessed bloodbath with frontline gauges declining below their crucial 35,600 (Sensex) and 10,950 (Nifty) levels in early deals. The markets took a beating on back of several announcements made yesterday in his speech by Finance Minister Arun Jaitley during Union Budget 2018. The Finance Minister’s proposal to levy long-term capital gains tax (LTCG) of 10% on gains exceeding Rs 100,000 from sale of equity shares spooked investors. This move may reduce incentive for investors to hold equities for longer term as the difference between tax on short and long term capital gains is only 5%. Investors are expected to churn their portfolios more and the enthusiasm for equities may dip. The investors were also worried about the fiscal slippage issue, largely because of the degree of deviation as well. This fiscal deficit will put pressure on government borrowing. Besides, the imposition of a fresh tax on income from Mutual Funds could also have spooked investors.

Selling further crept in after Fitch Ratings said that high debt burden of the government constrains India’s rating upgrade, a day after Finance Minister Arun Jaitley projecting a fiscal deficit of 3.5 per cent of GDP against the earlier target of 3.2 per cent. The report enlightened that weak public finances constrain India’s sovereign ratings, given a high general government debt burden of around 68 per cent of GDP and a wide fiscal balance of 6.5 per cent of GDP if states are included. Separately, a report enlightened that India reported a fiscal deficit of $97.27 billion for April-December or 113.6% of the budgeted target for the current fiscal year that ends in March. Net tax receipts in the first nine months of 2017/18 fiscal year were Rs 9 trillion. Traders failed to get any relief with Finance Minister Arun Jaitley’s statement that India's $2.5 trillion economy is now firmly on course to register a strong growth rate of over 8 percent and indicated that the country has grown on an average of 7.5 percent in the first three years of the Modi government. Therefore, he expects that the country will grow at 7.2 to 7.5 percent in the second half of the current fiscal, ending March 31.

On the global front, Asian markets closed mixed. China’s manufacturing sector sustained growth at multi-month highs in January, as factories continued to raise output to meet new orders, suggesting resilience in the world’s second-largest economy. The European markets were trading in red and were set for their biggest weekly loss in six months as a slump in Deutsche Bank after a bigger-than-expected loss hit the heavyweight banking sector. Some investors also see signs of a potential market correction as yields continue to go up.

The BSE Sensex ended at 35040.21, down by 866.45 points or 2.41% after trading in a range of 35006.41 and 35738.13. There were 3 stocks advancing against 28 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 4.13%, while Small cap index was down by 4.69%. (Provisional)

The top losing sectoral indices on the BSE were Realty down by 6.52%, Basic Materials down by 4.16%, Utilities down by 4.04%, Power down by 3.99% and Consumer Disc down by 3.82%, while there were no gainers on BSE. (Provisional)

The few gainers on the Sensex were TCS up by 0.30%, ITC up by 0.20% and Hindustan Unilever up by 0.19%. (Provisional)

On the flip side, Bajaj Auto down by 4.77%, Maruti Suzuki down by 4.33%, Axis Bank down by 4.30%, Bharti Airtel down by 4.29% and Reliance Industries down by 4.04% were the top losers. (Provisional)

Meanwhile, the government has planned to borrow less from the market in the next fiscal year as compared to the current fiscal’s revised estimate of net borrowing. Market borrowing by the government will be lower at Rs 4.07 lakh crore in 2018-19 as against revised estimate of Rs 4.79 lakh crore in 2017-18, a difference of around Rs 73,000 crore. However, gross borrowing for the next fiscal has been raised to Rs 6.05 lakh crore.

As per the revised estimate, net and gross market borrowing for the current fiscal, have pegged higher at Rs 4.79 lakh crore and Rs 5.99 lakh crore, respectively as against the Budget estimate of Rs 3.5 lakh crore  and Rs 5.8 lakh crore, respectively. Besides, repayment for past loans for the next fiscal has been pegged at 1.4 lakh crore.

Indicating pressure on the fiscal maths, the government deviated from the fiscal deficit target of 3 per cent to 3.3 per cent of gross domestic product (GDP) for the next fiscal. In the Budget, the government proposed to accept key recommendations of the Fiscal Reform and Budget Management Committee relating to adoption of the Debt Rule and to bring down Central Government’s Debt to GDP ratio to 40% and also accepted the recommendation to use Fiscal Deficit target as the key operational parameter.

The CNX Nifty ended at 10738.80, down by 278.10 points or 2.52% after trading in a range of 10736.10 and 10954.95. There were 4 stocks advancing against 46 stocks declining on the index. (Provisional)

The top gainers on Nifty were Tech Mahindra up by 1.33%, HCL Tech up by 0.80%, TCS up by 0.20% and Infosys up by 0.03%. (Provisional)

On the flip side, Ultratech Cement down by 5.77%, Bajaj Finance down by 5.58%, Bajaj Auto down by 5.21%, HPCL down by 4.80% and GAIL India down by 4.70% were the top losers. (Provisional)

The European markets were trading mostly in red; UK’s FTSE 100 decreased 16.16 points or 0.22% to 7,474.23, Germany’s DAX decreased 158.19 points or 1.22% to 12,845.71 and France’s CAC decreased 55.75 points or 1.02% to 5,398.80.

Asian equity markets ended mixed on Friday as rising bond yields and mixed earnings from top US companies helped induce some caution ahead of the closely-watched US monthly jobs report for January, due later in the day. Japanese shares fell, dragged down by banks after the Bank of Japan upped bond purchases as part of efforts to prevent bond yields from rising. Meanwhile, Chinese stocks reversed initial losses to end higher as investors looked ahead to the release of January trade and inflation numbers due next week for further clues on the economic outlook.