Bears take full control over Dalal Street; Nifty breaches 10,500 mark

Extending their losing streak for sixth straight session, Indian equity benchmarks ended the daunting day of trade with a cut of over one and a half percent on Tuesday, breaching their crucial 34,200 (Sensex) and 10,500 (Nifty) levels. Short covering in last leg of trade helped markets to pare most of their initial losses. Markets started the session with gap-down opening and shaved off around three and a half percent amid global sell off. Traders remained concerned ahead of the Reserve Bank of India’s (RBI’s) policy review meeting outcome on tomorrow amid expectations that the central bank will tighten its monetary policy stance in the wake of growing concerns over fiscal slippage. Investors also remained concerned on private report that lower indirect tax revenue collections may outweigh any upside risks from higher nominal GDP growth, non-tax revenue and direct tax collection. Traders also took note of foreign brokerage report which enlightened that the economy will grow 7.5 percent level in the first half on a lower base, but will slip down to 7 percent in the second half of the next fiscal. The report added that even with the jump, it will continue to trend 1 percentage point lower than the potential growth of the economy.

Sentiments also remained dampened with private report that the budgeted fiscal deficit is in line with expectations but there are some risks of slippage in financial year 2018-19, unless economic activities formalize at a rapid pace. It estimates a 20 bps upside risk to the fiscal deficit in 2018-19, unless economic activities formalize at a rapid pace over the coming year to generate the necessary buoyancy in revenues. Markets even breached their crucial 33,600 (Sensex) and 10,300 (Nifty) levels in initial trades, but key gauges got strong support near those levels and managed to prune some of their initial losses, as traders took some relief with Finance Minister Arun Jaitley’s statement that expediting public services and ensuring fairness in procurement will supplement rapid economic growth in the South Asian region including India. Investors also took some comfort with CBDT chairman Sushil Chandra’s statement that a large number of taxpayers have been brought into the net taking the total base to 8 crore and underlined that the government has consolidated direct tax reforms.

Weakness in European markets dampened sentiments, as a global sell-off in equities deepened and volatility spiked on growing worries over inflation and rising bond yields. Asian markets ended in red led by around 5% cut in Japanese market, as a surging yen following Monday's record plunge on the Dow Jones Industrial Average in New York hit exporters.

Back home, sugar stocks edged lower despite the food ministry proposing doubling of the import duty on sugar to 100 per cent to curb cheaper imports, check falling wholesale prices of sweetener and ensure timely payment to cane farmers. In scrip specific development, Bank of Maharashtra declined on reporting net loss of Rs 596.70 crore in Q3, however, Vijaya Bank surged on planning to raise Rs 1,277 crore on preferential basis and Kellton Tech soared on launching new product ‘IoT enabled Al Platform’.

Finally, the BSE Sensex tumbled 561.22 points or 1.61% to 34,195.94, while the CNX Nifty was down by 168.30 points or 1.58% to 10,498.25.

The BSE Sensex touched a high and a low of 34,521.01 and 33,482.81, respectively and there were 1 stock on gaining side as against 30 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index declined 1.68%, while Small cap index was down by 2.19%.

The top losing sectoral indices on the BSE were IT down by 2.80%, Consumer Durables down by 2.68%, TECK down by 2.51%, Realty down by 2.08% and Industrials was down by 2.07%, while there were no losers on the BSE sectoral front.

The lone gainer on the Sensex was Tata Steel up by 0.06%. On the flip side, Tata Motors down by 5.45%, Tata Motors - DVR down by 4.71%, TCS down by 3.58%, Kotak Mahindra Bank down by 2.70% and Hero MotoCorp down by 2.69% were the top losers.

Meanwhile, in line with the government’s earlier promises, Finance Minister Arun Jaitley has said that the basic rate of corporate tax can be brought down to 25 percent from the current 30 percent only after all the exemptions given to the industry have ended. He also said that it would not be proper to end exemptions midway as some industries may have been set up based on them. Therefore, he noted that the opportunity to reduce the corporate tax rate to 25 percent will arise when all the exemptions end in the due course.

In the Union Budget 2018-19, Jaitley announced that corporate tax would be reduced to 25 percent from the coming fiscal for companies which had a turnover up to Rs 250 crore during 2016-17. He said that for the remaining 7,000-odd companies, the average effective tax rate after considering the exemptions comes to about 22 percent. Talking about fiscal deficit, he said that the target of trimming it down to 3.2 percent of the gross domestic product (GDP) in the fiscal year ending March 2018, was missed mainly due to goods and services tax (GST) revenues accruing only for 11 months as against the expenditure being accounted for 12 months.

The minister further stated that revenues under the GST, which replaced 17 central and state levies including excise duty, service tax and VAT, accrue only after a month in which the sales are made. He also said that in contrast, the revenue from excise used to accrue just as the products left the factory. So, he pointed out that for the current fiscal, the government accounted for revenue for only 11 months, with the accruals of March coming in only in April. He mentioned that next year onwards, the 12 month cycle would be complete, and added that the buoyancy in GST collections as well as indirect taxes gave him confidence that it would be easier to meet the fiscal deficit target of 3.3 percent set for 2018-19.

The CNX Nifty traded in a range of 10,594.15 and 10,276.30. There were 5 stocks in green as against 45 stocks in red on the index.

The top gainers on Nifty were Bajaj Finance up by 3.80%, ICICI Bank up by 0.70%, Tata Steel up by 0.32%, Eicher Motors up by 0.30% and Bharti Airtel up by 0.07%. On the flip side, Lupin down by 6.95%, Tata Motors down by 5.19%, HCL Technologies down by 4.11%, Tech Mahindra down by 3.42% and TCS down by 3.33% were the top losers.

European markets were trading in red; Germany’s DAX declined 232.74 points or 1.83% to 12,454.75, UK’s FTSE 100 decreased 135.09 points or 1.84% to 7,199.89 and France’s CAC was down by 101.55 points or 1.92% to 5,184.28.

Asian stocks ended in red on Tuesday after the S&P 500 as well as the Dow Jones Industrial Average suffered their biggest percentage drops since 2011 overnight and erased all of their gains for 2018 on concerns about rising inflation and potentially higher interest rates. Japanese shares ended lower as a surging yen following Monday's record plunge on the Dow Jones Industrial Average in New York hit exporters. Further, Chinese shares tumbled as a global market rout intensified, with the Shanghai index posting its biggest loss in nearly two years on worries that inflationary pressures will prompt central banks to raise rates faster than expected.