Late hour recovery help markets to end flat

Indian equity benchmarks pared most of their morning losses to end largely flat on Wednesday. Markets started the session on pessimistic note with report that the Reserve Bank of India (RBI) is unlikely to reduce key policy rates in 2018 despite a dip in retail inflation in February. Risks like the higher minimum support prices (MSPs) for food grains promised in the budget can push up the inflation in the next fiscal year. Terming it as a challenging period for the central rate setting panel, the report highlighted that the rising MSPs are a risk and once inflation starts rising from the second quarter, the apex bank would turn more hawkish. Investors also took note of a private report stating that based on the current monthly rate of Rs 87,400 crore, the street expects that the Goods and Services Tax (GST) collection may remain range-bound unless compliance measures improve, particularly invoice matching. The lower GST run rate poses a risk to FY19 tax collection and to fiscal deficit. Meanwhile, the Centre has released Rs 28,398 crore as GST compensation to states for July-December, with Karnataka getting a major pie. The government has lowered the indirect tax revenue collection forecast in the revised estimates by Rs 51,856 crore to Rs 8.75 lakh crore in the current fiscal. As per the Budget estimates, over Rs 9.26 lakh crore was to be collected from indirect taxes.

Selling got extended and markets even went to test psychological 10,350 (Nifty) and 33,600 (Sensex) levels. But, key gauges witnessed recovery from thereon and pared most of their initial losses to end largely unchanged, supported by easing WPI inflation. India’s inflation on wholesale level softened in the month of February, continuing its easing trend for the third straight month. According to the latest data released by the government, WPI stood at 2.48% (provisional) in February as against 2.84% (provisional) for the previous month and 5.51% during the corresponding month of the previous year. Some support also came with report highlighting that revival in rural demand, increased infrastructure spending is likely to drive India's growth in current year, even as increasing debt and trade protectionism could pose a challenge. Traders also took some solace with Commerce and Industry Minister Suresh Prabhu’s statement that the new industrial policy, which will be released soon, will focus on modernising existing industries, besides pushing for frontier technologies like robotics and artificial intelligence.

Firm opening in European markets too aided sentiment. Euro zone industrial production was weaker than expected in January, mainly due to a sharp drop in the output of energy. Production in the 19 countries sharing the euro fell 1.0% month-on-month in January for a 2.7% year-on-year rise. Asian markets closed in red amid fears of rising US protectionism as President Donald Trump fired his Secretary of State.

Back home, select telecom stocks ended in red after the telecom regulator issued show-cause notices to some carriers over call drops and inability to meet prescribed benchmarks under the new quality of service rules in some circles, and has given them time till March 21 to present their side of the case. However, PSU Banking stocks edged higher despite increase in PNB fraud amount. Punjab National Bank told the police that it has uncovered additional exposure of about Rs 942.18 crore ($145.27 million) to Asmi Jewellery of Gitanjali Group in connection with a massive alleged fraud. This takes the Delhi-based lender’s total exposure to one of country’s biggest banking frauds up to Rs 13,640 crore from the earlier estimate of Rs 12,700 crore. Textile stocks remained buzzing on report that the Textiles Ministry should impress upon the Finance Ministry to reconsider the overall GST structure for textiles sector and impose higher anti-dumping duty to protect the domestic industry.

Finally, the BSE Sensex shed 21.04 points or 0.06% to 33,835.74, while the CNX Nifty was down by 15.95 points or 0.15% to 10,410.90.

The BSE Sensex touched a high and a low of 33,875.15 and 33,580.69, respectively and there were 13 stocks on gaining side as against 17 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.28%, while Small cap index was up by 0.06%.

The top gaining sectoral indices on the BSE were Bankex up by 0.56%, Consumer Durables up by 0.32%, IT up by 0.25%, Basic Materials up by 0.21% and Healthcare was up by 0.13%, while Oil & Gas down by 0.94%, Telecom down by 0.92%, Energy down by 0.63%, Realty down by 0.52% and Metal was down by 0.48% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 1.85%, Maruti Suzuki up by 0.99%, Axis Bank up by 0.89%, SBI up by 0.82% and ICICI Bank up by 0.77%. On the flip side, Hero MotoCorp down by 1.78%, ONGC down by 1.53%, Tata Steel down by 1.25%, HDFC down by 0.91% and Bajaj Auto down by 0.85% were the top losers.

Meanwhile, in order to give a fillip to the textile sector, the Standing Committee on Labour chaired by Kirit Somaiya, in its report, has said that the Textiles Ministry should impress upon the Finance Ministry to reconsider the overall Goods and Services Tax (GST) rate structure for the textiles sector and impose higher anti-dumping duty to protect domestic players in the sector.

The panel noted that the Textiles Ministry has also taken up the issues on inverted duties structure on man-made fibre, imposition of GST on job work, credit transfer documents issues, non-refund of input tax credit, GST for weaving industry, lowering of GST rates for machinery used by MSME textile units, etc. It observed that the Ministry of Finance has approved Rs 7,147.73 crore only during the year 2018-19, against the Textile Ministry’s proposed outlay of Rs 10,109.05 crore.

The Committee further said that the Secretary, Ministry of Textiles has deposed that though it appears that Budgeted Expenditure (B.E) 2018-19 which includes Cotton Corporation of India’s loss of Rs 921.23 crore is more than the B.E 2017-18 by Rs 921.23 crore, in reality B.E 2018-19 is Rs 3 crore less than the B.E of 2017-18. It noted that the reduction of B.E would adversely impact implementation of ongoing schemes of the Ministry of Textiles, particularly those aimed at benefitting the unorganised sectors of powerloom, handloom, handicrafts, wool and sericulture.

The CNX Nifty traded in a range of 10,420.35 and 10,336.30. There were 20 stocks in green as against 30 stocks in red on the index.

The top gainers on Nifty were Tech Mahindra up by 3.37%, Ambuja Cement up by 2.58%, Bajaj Finance up by 2.28%, Yes Bank up by 1.66% and Ultratech Cement up by 1.61%. On the flip side, Indian Oil Corporation down by 3.25%, Bharti Infratel down by 3.08%, HPCL down by 2.02%, Hero MotoCorp down by 1.60% and ONGC down by 1.55% were the top losers.

European markets were trading in green; France’s CAC gained 15.67 points or 0.3% to 5,258.46, UK’s FTSE 100 increased 17.25 points or 0.24% to 7,156.03 and Germany’s DAX was up by 32.66 points or 0.27% to 12,253.69.

Asian markets closed in red on Wednesday after US President Donald Trump blocked microchip maker Broadcom Ltd's proposed takeover of Qualcomm Inc on national security grounds and fired his secretary of state, sparking fears of protectionism. There were also reports that the Trump administration is eying hefty tariffs on Chinese imports. Chinese shares ended lower as worries about Trump's protectionist trade policies overshadowed encouraging industrial output data. China's industrial output climbed 7.2 percent in the January to February period from a year ago, faster than the 6.2 percent rise in December, a government report showed. That was also above the 6.6 percent increase economists had forecast. Further, Japanese shares lost ground, after four straight days of gains, as the dollar wallowed against the yen and other major currencies on speculation that geopolitical tensions may rise after Trump's decision to replace Secretary of State Rex Tillerson with CIA chief Mike Pompeo.