Late hour selloff drag benchmarks lower for third straight session

Extending their losing streak for third straight session, Indian equity benchmarks settled in red terrain on Tuesday. After a cautious start markets gained momentum and traded in green for most part of the day with traders taking encouragement with Suresh Prabhu’s statement that the government will soon come out with a comprehensive strategy to increase the share of global trade to 40 percent of the gross domestic product (GDP), which is expected to touch $5 trillion by 2025. Some support also came with NASSCOM, the IT industry body enlightening that the Indian Information Technology industry expects to grow exports at a marginally higher 7-9 percent in the coming fiscal, slightly higher than its expected growth of 7.8 percent in the current financial year. In June last year, NASSCOM had said it expects growth of 7-8 percent this fiscal. It expects to add $14-16 billion in revenue in the coming year.

However, sentiments turned pessimistic and sharp selloff in last leg of trade dragged markets lower. Traders turned cautious ahead of February Futures & Options (F&O) series to be expired on Thursday i.e. February 22, 2018. Traders also remained concerned after the government said the amount of money claimed by exporters as tax refunds under Goods and Service Tax (GST), from the time the regime came into force in July 2017, till December of that year, is Rs 55 billion. This is a major comedown from the Rs 65 billion that the Finance Ministry had announced last year as refunds claimed till October. Exporters continue to assert that thousands of millions worth of tax refunds are yet to be released by the authorities. Investors also took note that the GST Council, headed by Finance Minister Arun Jaitley, is likely to meet next week to decide on ease of compliance in filing the GST returns. Since the implementation of the GST on July 1, 2017, traders have been complaining about technical glitches in the GSTN, besides the complex process.

Weakness in European markets too dampened sentiments, as traders remained on sidelines ahead of release of the latest batch of corporate earnings. The mood among German investors worsened this month. The Mannheim-based ZEW research institute said its monthly survey showed its economic sentiment index fell to 17.8 from 20.4 in January. Asian markets ended in red led by over a percent fall in Japanese Nikkei, as the Bank of Japan will likely to continue its virtual normalization of monetary policy under its new leadership.

Back home, telecom sector rang loud on report that the Cabinet is likely to decide next month on the relief package for the telecom sector, based on the recommendations of an inter-ministerial group, including giving more time to telecom operators to make payment for spectrum and increasing the holding limit of radio waves. Sugar stocks displayed mixed reaction after CRISIL Ratings in its report highlighted that import duty and stock limits will improve prices and profitability of mills and sugarcane farmers alike. A raft of government measures earlier this month have come as relief for sugar mills and sugarcane farmers alike. These include increase in import duty on raw and white sugar to 100%, and restriction on sugar sales by imposition of stockholding limits for February and March.

Finally, the BSE Sensex shed 71.07 points or 0.21% to 33,703.59, while the CNX Nifty was down by 18 points or 0.17% to 10,360.40.

The BSE Sensex touched a high and a low of 33,960.95 and 33,657.89, respectively and there were 18 stocks on gaining side as against 13 stocks on losing side on the index.

The broader indices ended in red; the BSE Mid cap index slipped 0.06%, while Small cap index was down by 0.15%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.66%, Metal up by 1.19%, Telecom up by 0.77%, Basic Materials up by 0.63% and TECK was up by 0.45%, while Realty down by 0.64%, Bankex down by 0.61%, Capital Goods down by 0.30%, Auto down by 0.27% and Healthcare was down by 0.26% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 1.84%, ONGC up by 1.11%, Bharti Airtel up by 0.85%, SBI up by 0.75% and TCS up by 0.70%. On the flip side, Mahindra & Mahindra down by 2.48%, Axis Bank down by 1.44%, Kotak Mahindra Bank down by 1.09%, Yes Bank down by 1.06% and Reliance Industries down by 0.70% were the top losers.

Meanwhile, in a bid to give a fillip to clean energy sources, the government has extended the period to avail transmission charge waivers for the solar and wind power projects. The projects commissioned on or before March 2022 can use the inter-state transmission system (ISTS) for free. For wind and solar projects, the existing waiver was previously applicable to projects commissioned up to March 31, 2019 and December 31, 2019, respectively. The waiver was available for a period of 25 years from the date of commissioning of such projects. 

According to an order issued by the power ministry, for generation projects based on solar and wind resources, no ISTS charges and losses will be levied on transmission of the electricity through inter-state transmission system for sale of power by such projects commissioned till March 31, 2022. The order also provides that the waiver would be available to only those projects which are awarded through competitive bidding process. Earlier, the incentive was not available to firms other than power distribution companies. Thus, other entities procuring clean energy from these projects were at disadvantageous position, now they can also avail the benefit.

The order also provides that these new conditions for wavier of transmission charges and losses irrespective of purchasing entity will be applicable prospectively, the order dated February 13, 2018. The order assumes significance in view of India’s ambitious target of raising renewable energy capacities to 175 GW by 2022 including 100 GW of solar and 60 GW of wind energy. At present, India’s installed renewable generation capacity is 62.84GW excluding large hydro projects above 25MW.

The CNX Nifty traded in a range of 10,429.35 and 10,347.65. There were 27 stocks in green as against 22 stocks in red, while one stock remained unchanged on the index.

The top gainers on Nifty were Ambuja Cement up by 3.16%, Vedanta up by 2.70%, Coal India up by 1.83%, Bharti Infratel up by 1.39% and Asian Paints up by 1.19%. On the flip side, Mahindra & Mahindra down by 2.16%, Axis Bank down by 1.82%, Aurobindo Pharma down by 1.37%, Kotak Bank down by 1.37% and Yes Bank down by 1.28% were the top losers.

European markets were trading mostly in red; UK’s FTSE 100 declined 39.7 points or 0.55% to 7,207.96 and Germany’s DAX was down by 21.13 points or 0.17% to 12,364.47, while France’s CAC was up by 4.17 points or 0.08% to 5,260.35.

Asian stocks closed in red on Tuesday in the absence of any lead from Wall Street and amid weak cues from Europe. Investors remained on sidelines ahead of minutes from the latest Federal Open Market Committee meeting and a slew of speeches by Fed officials this week to assess the outlook for rate tightening. Japanese Nikkei edged lower by over a percent, as a combination of a retreat in risk appetite and profit-taking dented the broader market, with financials and index-heavy shares underperforming. Markets in China and Taiwan remained closed for the Lunar New Year holidays.