Markets end near day’s low; Sensex breaches 35,300 mark

Indian equity benchmarks ended Wednesday’s session near intraday lows, with Sensex and Nifty breaching their crucial 35,300 and 10,700 levels, respectively, following weak global cues. The bourses started the session slightly in green, taking support with NITI Aayog Vice Chairman Rajiv Kumar’s statement that the Indian economy will grow at the rate of at least 7.5% in the current fiscal (FY19) and added that the growth may even go as high as 7.8%, even though as most global rating agencies have kept the country’s growth forecast between 7.3-7.4%. Traders also got comfort with Finance Secretary Hasmukh Adhia’s statement that Goods and Services Tax (GST) has entered a smooth phase within a year of its rollout, with pretty good tax compliance and the efforts will now be to simplify tax return forms. Some support came with a report stating that amidst trade and tariff tension between India and the US, but the fundamentals of the relationship are very strong and the sentiment about India among American companies are positive as it provides a huge market. 

However, the markets failed to hold their gains and soon slipped into red territory, as investors got cautious with the Ministry of Finance’s Quarterly Report on Debt Management showing that the government debt increased 1.7% to over Rs 76.94 lakh crore in the last quarter of financial year 2017-18 over the previous quarter. The debt was Rs 75.66 lakh crore as of December 2017. At this level, the ratio of outstanding liabilities of the central government to GDP worked-out to be 45.9% at end-March 2018. Domestic sentiments weakened further with the Reserve Bank of India (RBI) calling for greater vigilance on the domestic macro-economic front saying conditions, which pushed Gross Domestic Product (GDP) growth to 7.7% in March 2018 quarter, are changing and warned that bad loan situation might worsen.  Investors also remained concerned with rising crude prices that will trigger inflation and accelerate fiscal deficit.

On the global front, European markets were trading in green, despite trade worries persist after the US House of Representatives overwhelmingly passed a bill to tighten foreign investment rules amid concerns over China’s unfair trade and intellectual property practices. In economic releases, France's consumer sentiment weakened in June to the lowest level in nearly a year. As per survey results from the statistical office Insee, the consumer confidence index dropped to 97 from 99 in May, which was revised down from 100. However, Asian markets ended lower, as investors waited to see the next development in the trade tussle involving the US and China.

Back home, on the sectoral front, banking stocks ended in red terrain, as the Reserve Bank of India (RBI) in its latest ‘June 2018 Financial Stability Report’ estimated that bad loans of scheduled commercial banks (SCBs) are likely to surge to 12.2% by March 2019 from 11.6% level seen in March 2018, while cement stocks also ended lower, despite domestic credit rating agency, ICRA’s latest report stating that domestic cement output is likely to register a growth of 6% in the financial year 2019. Besides, Information Technology stocks ended higher after the rupee touched fresh 19-month low against the dollar.

Finally, the BSE Sensex slipped 272.93 points or 0.77% to 35,217.11, while the CNX Nifty was down by 97.75 points or 0.91% to 10,671.40.

The broader indices ended in red; the BSE Mid cap index declined 1.50%, while Small cap index was down by 2.00%.

The lone gaining sectoral index on the BSE was IT up by 0.10%, while Oil & Gas down by 3.81%, PSU down by 2.84%, Utilities down by 2.68%, Capital Goods down by 2.37% and Energy down by 2.26% were the top losing indices on BSE.

The top gainers on the Sensex were HDFC Bank up by 0.89%, Coal India up by 0.74%, TCS up by 0.38% and Sun Pharma up by 0.35%. On the flip side, ICICI Bank down by 3.16%, Larsen & Toubro down by 2.71%, Tata Motors - DVR down by 2.44%, Tata Motors down by 2.22% and SBI down by 2.06% were the top losers.

Meanwhile, days before Goods and Services Tax (GST) rollout completes a year, Finance Secretary Hasmukh Adhia has said that natural gas and aviation turbine fuel (ATF) are ‘natural’ and ‘easier’ candidates for inclusion in the GST regime. He also said that the regime’s highest decision making body GST Council will take a call on bringing these two items within the purview of new tax regime. However, he did not say if it would be on the agenda for the next GST Council meeting on July 21.

Adhia further highlighted that since GST roll out on July 1 last year, the government has cut tax rates on a slew of goods and services as well as simplified rules in an attempt to rationalise the regime that reshaped India's industrial landscape as it widened the country’s tiny tax base, removed myriad middlemen, vanquished border checkposts, freed up internal trade and made it easier to do business.

Though, Finance Secretary pointed out that the challenge has been to include cash cows crude oil, natural gas, petrol, diesel and ATF under GST. He noted that oil yielded maximum revenue for both the central and state governments, and none seemed to want to let go of it. Besides, he mentioned that while prevailing tax rate, made up of central excise duty and state VAT on petrol and diesel, is way beyond the 28 percent peak tax rate under GST, tax incidence on natural gas and ATF is low enough to get fitted into one of the 5, 12, 18 and 28 per cent GST tax bracket. 

The CNX Nifty traded in a range of 10,785.50 and 10,652.40. There were 8 stocks in green as against 42 stocks in red.

The top gainers on Nifty were Tech Mahindra up by 4.12%, Bharti Infratel up by 2.41%, HCL Tech. up by 1.27%, HDFC Bank up by 1.01% and Cipla was up by 1.00%. On the flip side, BPCL down by 8.33%, HPCL down by 7.87%, Indian Oil Corporation down by 6.83%, GAIL India down by 4.61% and UPL was down by 3.41% were the top losers.

All European markets were trading in green; UK’s FTSE 100 was up by 18.16 points or 0.24% to 7,556.08, France’s CAC increased 9.31 points or 0.18% to 5,290.60 and Germany’s DAX gained 16.14 points or 0.13% to 12,250.48.

Asian equity markets ended broadly lower on Wednesday, with Chinese and Hong Kong markets pacing regional declines, after the US House of Representatives overwhelmingly passed a bill to tighten foreign investment rules and the Trump administration threatened sanctions on countries that continue to import oil from Iran. Chinese markets fell heavily and the yuan hit its lowest level against the greenback since December 2017 on concerns over an ongoing trade dispute with the United States. Further, Japanese shares ended lower as the dollar slipped against the yen on worries over US protectionist policies.