Benchmarks end in green on growth in eight core sectors, higher direct tax collection

Extending previous session’s gains, Indian equity benchmarks ended the Tuesday’s trade with a gain of one third of a percent. Markets started the session on cautious note and entered into red terrain in morning deals with escalating trade tensions between the US and China. Investors also remained on sidelines ahead to the Reserve Bank of India’s (RBI) policy decision on April 5 for directional cues. The central bank is expected to maintain status quo on rates despite increased risks to inflation posed by rising oil prices and a hike in minimum support price (MSP) announced in the Budget 2018. Traders also remained concerned with ICRA’s report that more Indian companies are likely to default on their borrowings in the fiscal year that started in April compared with the previous year on higher interest costs and a deterioration in business conditions. Adding to the pessimism, India’s manufacturing sector activity expanded at its slowest pace in the month of March to fall at 5-month low. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance - slowed down to 51.0 in March from 52.1 in February.

However, markets took U-turn and started paring losses to enter into green terrain in last leg of trade with traders taking support from report that the government’s revenue collection during fiscal year 2017-18 gone up by 17.1% at Rs 9.95 lakh crore, supported by the addition of one crore new assessees who have started filing income tax returns. Traders also took some solace with report that a steep rise in output of cement and fertilisers pushed up the growth of the core sector to 5.3% in February even as refinery products, electricity, coal, and natural gas production made the output of the infrastructure industries grow slower than 6.1% in January. Market participants also drew some support with Finance Secretary Hasmukh Adhia’s statement that the government is on the course of meeting the fiscal deficit target of 3.5% of gross domestic product (GDP) for 2017-18. He added that this will be aided by buoyant tax collections, especially on the direct tax side coupled with Goods and Services Tax (GST) collections and natural savings by ministries.

On the global front, European markets were trading in red after the euro zone’s manufacturing boom stumbled for a third month in March as optimism waned and demand ebbed. However, output remained robust and expansion was still broad-based across the region. Most of the Asian markets ended in red terrain as renewed trade tensions, a sharp fall in crude oil prices and another sell-off in US technology stocks rattled investors.

Back home, rating agency Crisil warned that the ongoing probes into the frauds and allegations of improprieties against bankers will dent credit growth in the new fiscal year, even though the banks will see their dud assets piles peaking. On the sectoral front, banking stocks edged higher as the Reserve Bank of India allowed banks to spread their bond trading losses, a change that is likely to boost profitability of lenders as well as spur a rally in stock and bond markets. Under the change, lenders can spread bond-trading losses incurred in the December 2017 and March 2018 quarters equally over four quarters. This will come as a major reprieve to the public sector banks, which have been hard hit by trading losses from a spike in bond yields over recent months.

Finally, the BSE Sensex surged 115.27 points or 0.35% to 33,370.63, while the CNX Nifty was up by 33.20 points or 0.33% to 10,245.00.

The BSE Sensex touched a high and a low of 33,402.94 and 33,153.83, respectively and there were 18 stocks on gaining side as against 13 stocks on losing side on the index.

The broader indices ended in green; the BSE Mid cap index surged 0.92%, while Small cap index was up by 1.35%.

The top gaining sectoral indices on the BSE were Power up by 1.57%, Utilities up by 1.13%, PSU up by 1.11%, Bankex up by 1.08% and Industrials was up by 0.96%, while Consumer Durables down by 0.60%, IT down by 0.24% and TECK was down by 0.08% were the few losing indices on BSE.

The top gainers on the Sensex were ICICI Bank up by 2.94%, Mahindra & Mahindra up by 2.92%, Tata Motors - DVR up by 2.22%, Yes Bank up by 2.11% and Power Grid Corporation up by 1.93%. On the flip side, Wipro down by 2.02%, ONGC down by 1.28%, Adani Ports & SEZ down by 0.86%, HDFC Bank down by 0.74% and Bajaj Auto down by 0.60% were the top losers.

Meanwhile, the government’s revenue collection during fiscal year 2017-18 has gone up by 17.1 percent at Rs 9.95 lakh crore, supported by the addition of one crore new assessees who have started filing income tax returns. According to the Ministry of Finance, the net Direct Tax collections represent 101.5% of the Budget Estimates (Rs 9.8 lakh crore) and 99% of the Revised Estimates (Rs 10.05 lakh crore) of Direct Taxes for FY 2017-18.

The Ministry also indicated that nearly 6.84 crore income tax returns (ITRs) were filed in FY18 against 5.43 crore in FY17, registering a growth of 26 percent. It noted that before adjusting for refunds, gross collections have increased by 13 percent to Rs 11.44 lakh crore in FY 2017-18. Further, the data showed that refunds amounting to Rs 1.49 lakh crore have been issued during 2017-18. It added that net corporate tax recorded a growth of 17.1% while net personal income tax (including STT) recorded a growth of 18.9%.

The data highlighted that during FY18, the number of new ITR filers has also increased to 99.49 lakh as compared to 85.51 lakh new ITR filers added during FY17, which translates into a growth of 16.3 percent. It pointed out that the increase in total returns filed and new returns filed during FY18 is a result of sustained efforts made by the Income Tax Department in following up with potential non-filers through email, SMS, statutory notices, outreach programmes, etc. as well as through structural changes made in law and the Government’s emphasis on widening of tax net.

The CNX Nifty traded in a range of 10,255.35 and 10,171.05. There were 30 stocks in green as against 20 stocks in red on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 4.59%, ICICI Bank up by 3.19%, Mahindra & Mahindra up by 2.93%, Bajaj Finserv up by 2.78% and HPCL up by 2.53%. On the flip side, Tech Mahindra down by 3.80%, Wipro down by 1.86%, Hindalco down by 1.61%, Titan Company down by 1.57% and ONGC down by 1.47% were the top losers.

The European markets were trading in red; Germany’s DAX declined 127.41 points or 1.05% to 11,969.32, France’s CAC decreased 28.38 points or 0.55% to 5,138.92 and UK’s FTSE 100 was down by 22.43 points or 0.32% to 7,034.18.

Asian stocks closed mostly lower on Tuesday and safe-haven assets such as gold and the yen rose as renewed trade tensions, a sharp fall in crude oil prices and another sell-off in US technology stocks rattled investors. Chinese shares ended lower on concerns that the Chinese retaliatory tariffs could dampen market confidence and hurt economic growth. Further, Japanese shares closed lower, dragged down by exporters and technology stocks. Though, Hong Kong stocks reversed earlier losses and ended higher, led by gains in consumer goods makers, although caution prevailed amid escalating trade tensions after Beijing unveiled retaliatory trade measures against the United States.