Benchmarks trade above water in early deals

Paring most of their initial gains, Indian equity benchmarks are trading slightly in green. Traders are getting some support with a private report that the credit growth in the micro, small and medium enterprises (MSME) sector is improving with the overall exposure reaching the highest level in over a year and impacts of demonetisation and the GST also seem to be subsiding. As per the report the overall credit exposure has shown the highest growth in last five quarters at Rs 54.20 trillion as of March 31, 2018, with MSMEs segment constituting Rs 12.6 trillion (23%) of the commercial credit outstanding. Some support also come with report that the government has cleared pending GST refunds to the tune of Rs 38,062 crore to the exporters so far. However, gains remained capped with former NASSCOM president R Chandrashekhar sounding a note of caution on the economy, saying it could bedisrupted if job growth was not constant. He said government statistics showed that nearly four million jobs in the formal sector were created from September 2017 to March 2018, of which about 50% were in the service sector.

On the global front, Asian markets were trading mostly in red at this point of time in the absence of fresh developments in the US-China trade war. The US markets ended mostly higher on Wednesday, as traders shrugged off concerns about a trade war been the US and China.

Back home, investors are eyeing the markets regulator SEBI’s meeting where it will discuss proposed overhaul of governance norms for market infrastructure institutions as well as amendments to buyback and takeover norms. Other proposals, including reducing the cooling off period for former employees to one year and review of the watchdog's recruitment policy, are also on the agenda. In scrip specific developments, Adani Transmission surged on acquiring entire stake in GTL and Cipla moved up on getting approval for Testosterone Cypionate Injection.

The BSE Sensex is currently trading at 35575.88, up by 28.55 points or 0.08% after trading in a range of 35536.88 and 35678.69. There were 12 stocks advancing against 19 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index gained 0.01%, while Small cap index was down by 0.13%.

The top gaining sectoral indices on the BSE were Capital Goods up by 0.30%, Energy up by 0.24%, Industrials up by 0.24%, Realty up by 0.19% and Consumer Durables was up by 0.19%, while Telecom down by 0.83%, PSU down by 0.52%, Utilities down by 0.49%, Power down by 0.35% and Oil & Gas down by 0.31% were the top losing indices on BSE.

The top gainers on the Sensex were Adani Ports up by 1.89%, ICICI Bank up by 1.67%, Tata Steel up by 0.66%, Reliance Industries up by 0.63% and Larsen & Toubro up by 0.61%. On the flip side, Power Grid Corporation down by 1.53%, Wipro down by 0.77%, ONGC down by 0.71%, Bajaj Auto down by 0.60% and NTPC down by 0.48% were the top losers.

Meanwhile, amid suggestions to bring petrol and diesel under ambit of new indirect tax to curb the price hike, the government has said that a peak tax rate of 28% plus states levying some amount of local sales tax or Value Added Tax (VAT) on petrol and diesel is likely to be the tax structure when the two auto fuels are covered under the Goods and Services Tax (GST) regime. It added that the peak GST rate plus VAT will be equal to the present tax incidence, which is made up of excise duty, levied by the central government, and VAT charged by the states. It also said that there is no pure GST on petrol and diesel anywhere in the world and so in India too it will have to be a combination of GST and VAT.

However, the government highlighted that before the two fuels are put under new indirect tax, the Centre has to decide if it is willing to let go the Rs 20,000 crore input tax credit it currently pockets by keeping petrol, diesel, natural gas, jet fuel and crude oil out of the GST regime that came into force from July 1, 2017. It added that the timing of including petro products in GST will be a political call which the centre and states will have to take collectively.

Besides, the Centre currently levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. On top of this, states levy VAT - the lowest being in Andaman and Nicobar Islands where a 6% sales tax is charged on both the fuel. Mumbai has the highest VAT of 39.12% on petrol, while Telangana levies highest VAT of 26% on diesel. Delhi charges a VAT of 27% on petrol and 17.24% on diesel. The total tax incidence on petrol comes to 45-50% and on diesel it is 35-40%.

As per the government, under GST the total incidence of taxation on a particular good or a service has been kept at the same level as the sum total of central and state levies existing pre-July 1, 2017. This was done by fitting them into one of the four GST tax slabs of 5, 12, 18 and 28%. For petrol and diesel, the total incidence of present taxation is already beyond the peak rate and if the tax rate was to be kept at just 28% it would result in a big loss of revenue to both centre and states.

The CNX Nifty is currently trading at 10780.05, up by 8.00 points or 0.07% after trading in a range of 10764.15 and 10809.60. There were 20 stocks advancing against 29 stocks declining on the index, while 1 stock remained unchanged.

The top gainers on Nifty were Zee Entertainment up by 2.03%, Adani Ports up by 1.87%, ICICI Bank up by 1.67%, Bajaj Finserv up by 1.15% and Reliance Industries up by 0.95%. On the flip side, Bharti Infratel down by 3.26%, GAIL India down by 1.43%, Power Grid Corporation down by 1.28%, HPCL down by 1.23% and Dr. Reddys Lab down by 1.01% were the top losers.

Asian markets are trading mostly in red; Straits Times declined 8.28 points or 0.25% to 3,307.62, Hang Seng decreased 187.38 points or 0.63% to 29,508.79, KOSPI shed 11.92 points or 0.51% to 2,351.99, Jakarta Composite slipped 12.81 points or 0.22% to 5,871.23 and Shanghai Composite was down by 5.92 points or 0.20% to 2,909.81.

On the flip side, Taiwan Weighted rose 37.50 points or 0.34% to 10,964.94 and Nikkei 225 was up by 164.55 points or 0.72% to 22,719.98.