Benchmarks extend losses in morning session

Indian equity benchmarks extended their losses in morning session on account of selling in frontline blue chip counters. Sentiments were dampened with a private report highlighting that tax authorities have asked many companies to reverse claims of input credit made on investments in mutual funds and other securities, in a move that could increase the tax burden on corporate India. The report added that notices were recently issued to companies such as Mahindra & Mahindra, Japanese automobile giant Honda, South Korean major Hyundai and pharma company Cipla, informing them that their claims of input tax credit on non-core services would not be allowed. Separately, reversing its two-year streak of rising in the rankings, India has fallen out of the top 10 in the FDI Confidence Index 2018 of global consultancy firm, for the first time since 2015. India slipped three places to 11th position on the index. The report said that some policies may have deterred investors, at least in the short term.

Meanwhile, a RBI research paper highlighted that bad loans have impaired monetary policy transmission in India as banks were unable to increase their lending rates and protect net interest margins (NIMs) amid a broad deterioration in asset quality between 2013 and 2017. The report showed that NIMs of public sector banks, which had large NPA/stressed assets, were negatively impacted, while NIMs of private sector and foreign banks were not. Investors took note of foreign brokerage report stating that India’s weight-age in the MSCI Emerging Market Index is likely to fall 20 basis points as a result of inclusion of China A-shares, which would entail total outflows of around $540 million by passive funds. The MSCI will announce the results of its semi-annual index review on the morning of May 15 and the changes will be effective from June 1. Separately, three years after the launch of Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Modi government’s flagship initiative to introduce urban reforms and provide civic amenities in 500 cities, 0.38% of the mission outlay has been utilized so far.

Traders were seen selling in Realty, Capital Goods and FMCG sector stocks. In scrip specific developments, Hindustan Construction Company (HCC) tumbled as investors were wary of an auditor report regarding its debt situation. A report showed that the auditor for Lavasa Corporation has said that the net-worth of subsidiaries of HCC has been fully or significantly eroded. InterGlobe Aviation edged lower after its March quarter net profit slumped to almost a fourth of last time’s to Rs 117.6 crore due to high fuel costs, decline in yields and adverse foreign exchange. Revenue was up by almost a fifth to Rs 5799.1 crore. Margin at the level of earnings before finance income and cost, tax, depreciation, amortization and aircraft and engine rentals margin was down 811 basis points to 19.4 percent.

On the global front, Asian markets were trading mostly in red as hopes waned for real progress in Sino-US trade talks. China’s senior government said that the country won’t succumb to threats from the US. The official said the government won’t accept any US preconditions for negotiations such as abandoning its long-term advanced manufacturing ambitions or narrowing the trade gap by $100 billion. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 35,100 and 10,700 levels, respectively. The market breadth on BSE was negative in the ratio of 538:1639, while 86 scrips remained unchanged.

The BSE Sensex is currently trading at 35040.79, down by 135.63 points or 0.39% after trading in a range of 35026.06 and 35257.31. There were 10 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.09%, while Small cap index was down by 1.00%.

The top losing sectoral indices on the BSE were Realty down by 1.72%, Capital Goods down by 1.50%, FMCG down by 1.30%, Industrials down by 1.30% and Healthcare down by 1.02%, while there were no gainers on BSE sectoral front.

The top gainers on the Sensex were Axis Bank up by 1.86%, Adani Ports & Special Economic Zone up by 1.25%, ICICI Bank up by 1.14%, NTPC up by 0.94% and ONGC up by 0.56%.

On the flip side, Hindustan Unilever down by 1.73%, Tata Motors down by 1.59%, ITC down by 1.38%, Larsen & Toubro down by 1.36% and Tata Motors - DVR down by 1.35% were the top losers.

Meanwhile, snapping its two-year rising streak in the rankings, India has dropped by three spots to eleventh position in global consultants AT Kearney’s Foreign Direct Investment (FDI) Confidence Index 2018. According to the report, India’s position was pushed out of the top 10 for the first time since 2015. It indicated that besides India, China (5) and Singapore (12) have ranked lower this year, while Australia has risen to eight and New Zealand jumped to the sixteenth spot in only its second year on the Index. It added that Japan and South Korea hold steady at sixth and eighteenth spot, respectively.

The report further stated that India had secured eighth position in 2017, while it was at ninth rank in the previous year. Further, it said that some policies may have deterred investors, at least in the short term. It pointed out that the nationwide goods and services tax (GST) regime rolled-out on July 1 last year, for example, has faced implementation challenges, and the demonetisation of Rs 500 and Rs 1000 currency notes announced on November 8, 2016 disrupted business activity and weighed on economic growth. About Asia Pacific region, it said that investor preference for the region appears to have declined slightly, with only seven Asian countries appearing on this year's Index.

As per the report, investors based in the Americas and in the industry sector rank India the highest in terms of their intention to invest there. It pointed out that this confidence may be a result of the governments Make in India initiative, which aims to boost investment in India's manufacturing sector as well as its pursuit of closer ties with the US. Besides, it said that reforms that have had a positive impact on India's attractiveness include the elimination of the Foreign Investment Promotion Board, a government agency responsible for reviewing all potential foreign investment, and the liberalisation of overseas investment thresholds for the retail, aviation, and biomedical industries. It added that FDI in India grew by a meager 0.27 percent to $35.94 billion during April-December 2017.

The CNX Nifty is currently trading at 10662.70, down by 55.35 points or 0.52% after trading in a range of 10657.15 and 10720.60. There were 16 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 3.01%, Axis Bank up by 1.81%, ICICI Bank up by 1.41%, NTPC up by 0.91% and Hindalco up by 0.72%.
On the flip side, HCL Tech down by 6.96%, Eicher Motors down by 2.07%, UPL down by 1.88%, Cipla down by 1.76% and Vedanta down by 1.76% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 504.94 points or 1.64% to 30,218.94, Jakarta Composite decreased 139.87 points or 2.33% to 5,872.37, Taiwan Weighted decreased 79.13 points or 0.75% to 10,539.68, KOSPI Index decreased 12.94 points or 0.52% to 2,492.67 and Shanghai Composite decreased 5.59 points or 0.18% to 3,075.59.

On the other hand, FTSE Bursa Malaysia KLCI increased 4.16 points or 0.22% to 1,856.19.

Japan Stock Exchange was closed on account of National holiday.