Benchmarks witness bloodbath in early deals

Indian equity benchmarks made an unpleasant start and are witnessing bloodbath in early deals with frontline gauges declining below their crucial 35,600 (Sensex) and 10,950 (Nifty) levels, as traders reacted negatively to the Finance Minister Arun Jaitley’s proposal of a long-term capital gains tax. Budget 2018 has proposed to levy long-term capital gains tax (LTCG) of 10% on gains exceeding Rs 100,000 from sale of equity shares. However, capital gains made on shares until January 31, 2018, would be grandfathered, the finance minister said. Also, there has been no change in the definition of short-term capital gains tax (STCG). Sentiments also remained dampened on report that India’s fiscal deficit, for nine months of Financial Year 2018, stands at Rs 6,20,949 crore, overshooting the budgeted estimate (BE) target by 113.6%. The government has estimated Rs 5,46,532 crore of fiscal deficit for FY18 which during the same period of the last year stood negative at 93.9%.

On the global front, Asian markets were trading mostly in red after the Wall Street closed mixed and yields on US government debt rose in the last session. Japanese market was trading a percent lower on a stronger yen. Rising U.S. bond yields also dented investors’ sentiments. The US markets ended the choppy trade slightly in red, as traders seemed reluctant to make significant moves ahead of the release of the closely watched monthly jobs report on Friday.

Back home, this year's budget focussed more on rural and agri economy and the government is committed to the welfare of the fares. In scrip specific development Bajaj Auto and Ashok Leyland declined despite reporting growth in January sales numbers. Lupin edged higher on launching generic Clobex Lotion in US.

The BSE Sensex is currently trading at 35551.13, down by 355.53 points or 0.99% after trading in a range of 35549.18 and 35738.13. There were 5 stocks advancing against 26 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index tumbled 1.89%, while Small cap index was down by 2.27%.

The few gaining sectoral indices on the BSE were IT up by 0.78%, TECK up by 0.51% and FMCG was up by 0.12%, while Consumer Durables down by 5.00%, Realty down by 2.61%, Power down by 2.12%, Utilities down by 2.06% and Consumer Discretionary Goods & Services was down by 1.90% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 1.54%, Infosys up by 1.26%, TCS up by 1.15%, Sun Pharma up by 0.87% and Dr. Reddys Lab up by 0.78%. On the flip side, HDFC down by 2.73%, Indusind Bank down by 2.50%, ONGC down by 2.41%, Yes Bank down by 2.20% and Adani Ports down by 2.09% were the top losers.

Meanwhile, global rating agency Moody’s Investors Service, in its latest report, has said Budget 2018 is in line with the government’s fiscal consolidation path and the fiscal deficit projection of 3.3% for fiscal year 2018-19 is in line with its forecast and the target will be achieved. Finance Minister Arun Jaitley, in the Budget, revised fiscal deficit estimates for the current financial year upwards at Rs 5.95 trillion or 3.5% of Gross Domestic Product (GDP) against the earlier estimate of 3.3% and also projected 3.3% for FY19, up from the road-map of 3% of GDP.

The ratings agency noted that the direction of fiscal deficit announced in the Budget is in line with their forecast and expect that fiscal deficit targets will be broadly achieved. It also warned that a slower broadening of the tax base after the note-ban and the goods and services tax (GST) implementation as well as weather-related impacts on crops could contribute to revenue slippage. On the other hand, it said that rapid rise in the number of taxpayers, albeit from a low base, could contribute to revenue growth more significantly than they currently expect. It also expects revenue generation targets will be broadly achieved as the medium- to long-term benefits of GST and note ban reforms, including increasing the size of the formal economy, are realized over the next several years.

Global rating agency further expects the somewhat larger deficit than initially budgeted for fiscal 2018, at 3.5%. However, it said that this outcome does not alter the longer-term trend towards fiscal consolidation. It forecasts the debt-to-GDP ratio to be about 69% in fiscal 2019, which incorporates their assessment of the deficit trends based on the announced budget. The high debt burden remains a credit constraint for the sovereign, and is not expected to diminish rapidly because of the country’s low income levels leading to significant development spending needs and constraining the scope of tax base broadening.

It further said that the continued focus to promote expenditure efficiency through rationalization of government schemes and better-targeted delivery and re-asserted endorsements of the FRBM committee recommendations are credit positive. For FY19, Jaitley has set a disinvestment target of Rs 80,000 crore. Moody’s said that this year's divestments exceeding targets marks a break in a recent trend of missing ambitious targets. Adding further, it said that increased divestments could.

The CNX Nifty is currently trading at 10906.55, down by 110.35 points or 1.00% after trading in a range of 10902.35 and 10954.95. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were HCL Tech up by 1.48%, Eicher Motors up by 1.42%, Sun Pharma up by 1.37%, ITC up by 1.34% and TCS up by 1.18%. On the flip side, Indiabulls Housing down by 5.11%, HDFC down by 2.66%, Indusind Bank down by 2.57%, Bajaj Finance down by 2.54% and Kotak Mahindra Bank down by 2.51% were the top losers.

Asian markets are trading mostly in red; Nikkei 225 decreased 245.73 points or 1.05% to 23,240.38, KOSPI Index declined 43.05 points or 1.68% to 2,525.49, Taiwan Weighted shed 35.17 points or 0.32% to 11,125.08, Shanghai Composite dropped 14.16 points or 0.41% to 3,432.82 and Hang Seng was down by 1.97 points or 0.01% to 32,640.12.

On the flip side, FTSE Bursa Malaysia KLCI increased 1 points or 0.05% to 1,869.58 and Jakarta Composite was up by 44.41 points or 0.67% to 6,642.87.