Benchmarks continue record breaking spree

Extending their record-breaking spree for third straight session, Indian equity benchmarks ended the session with a gain of around half a percent with Nifty conquering 11,300 mark, while Sensex ending just shy of 37,500 level. Markets soon after a positive start entered into red terrain as traders turned cautious ahead of the Reserve Bank of India (RBI) policy meet that begins on July 30. Sentiments remained dampened with a private report stating that the RBI’s rate-setting panel will go for a status quo on key policy rates at the August monetary policy review. Sentiments also remained dampened with rating agency Moody’s report stating that the recent Goods and Services Tax (GST) rate cuts on 88 items will weigh on government’s revenue collection and is ‘credit negative’ as it will put pressure on efforts of fiscal consolidation. Investors took note of Niti Aayog CEO Amitabh Kant’s statement that the country needs to improve its human development index (HDI) to achieve a growth of around 10%.

However, markets recouped losses and entered into green terrain, as traders took some encouragement with report that foreign investors have put in over Rs 1,800 crore in the Indian equity markets so far in July after pulling out massive funds in the preceding month. The latest inflow comes after such investors had taken out more than Rs 20,000 crore from the stock market during April-June. Markets extended gains to end near fresh all-time highs, as sentiments remained upbeat with Union Minister of State for Finance Shiv Pratap Shukla’s statement that the government is making concerted efforts to double the farmers' income by 2022. He also said that the government has also taken concrete steps as per the recommendations of the Swaminathan committee reports. Meanwhile, the government removed restrictions for imports of urea for industrial, non-agriculture and technical grade.

On the global front, European markets were trading in red in early deals on Monday, on the back of a disappointing session in the US and amid further earnings reports. Asian markets ended mostly in red, with investors wary as the Bank of Japan and other central banks hold policy meetings this week.

Back home, realty stocks edged higher despite S&P Global Ratings’ latest report that India’s infrastructure deficit is ‘too large’ and the country still has a long way to go before it can close the sizable deficit between supply and demand. Stocks related to telecom sector rang loud after Telecom Secretary Aruna Sundararajan said the turbulent days for the telecom industry are behind it, and things should settle down completely by early 2019. Agriculture related stocks were in limelight after Union Minister of State for Finance Shiv Pratap Shukla stated that the government is making concerted efforts to double the farmers’ income by 2022. Meanwhile, cement, ACs and televisions manufacturers companies remained in focus after Union Minister Arun Jaitley exuded confidence that GST rates on cement, ACs and televisions will be cut as tax revenues increase, and only luxury and sin goods will attract the highest slab of 28%.

Finally, the BSE Sensex surged 157.55 points or 0.42% to 37,494.40, while the CNX Nifty was up by 41.20 points or 0.37% to 11,319.55.

The BSE Sensex touched a high and a low of 37,533.50 and 37,292.45, respectively and there were 17 stocks advancing against 14 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index gained 0.30%, while Small cap index was up by 0.55%.

The top gaining sectoral indices on the BSE were Telecom up by 2.85%, PSU up by 2.20%, Energy up by 1.32%, Bankex up by 1.30% and Power was up by 1.18%, while IT down by 0.73%, TECK down by 0.25%, Capital Goods down by 0.22% and Industrials was down by 0.04% were the few losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 5.13%, ICICI Bank up by 4.76%, SBI up by 3.75%, Axis Bank up by 2.67% and Mahindra & Mahindra up by 2.52%. On the flip side, Infosys down by 1.56%, HDFC Bank down by 1.41%, Tata Motors - DVR down by 1.27%, Larsen & Toubro down by 1.19% and Adani Ports & SEZ down by 0.90% were the top losers.

Meanwhile, few days after the Goods and Services Tax (GST) Council cut tax rates on several products including refrigerators, washing machines and small televisions, the global credit rating agency, Moody’s Investors Service in its latest report has said that this recent move is ‘credit negative’ for the country as it will put pressure on efforts of fiscal consolidation and will weigh on the government's revenue collection.

According to the report, the government may face revenue loss of around 0.04%-0.08% of GDP annually, due to these tax cuts. The rating agency further noted that even-though the proportion of revenue loss is small, the vacillation in tax rates creates uncertainty around government revenue and comes amid persistent upside risks to its expenditures.

Besides, Moody’s underlined that the government’s budgeted gross tax revenue growth of 16.7% for the current fiscal and collections from GST, will play an important role to drive future government revenue because of a wider tax base and tax buoyancy. Further, the report said that GST collection has increased since December 2017, but iterative changes to tax rates create downside risks to the target of Rs 7.4 lakh crore ($100 billion) for the full fiscal year.

The CNX Nifty traded in a range of 11,328.10 and 11,261.45. There were 27 stocks in green as against 23 stocks in red on the index.

The top gainers on Nifty were Bharti Airtel up by 5.68%, ICICI Bank up by 4.88%, SBI up by 3.40%, Axis Bank up by 2.85% and Ultratech Cement up by 2.80%. On the flip side, HDFC Bank down by 1.70%, Infosys down by 1.63%, HCL Tech down by 1.61%, HDFC down by 1.53% and Bajaj Finance down by 1.46% were the top losers.

European markets were trading in red; UK’s FTSE 100 dropped 5.79 points or 0.08% to 7,695.52, Germany’s DAX shed 19.37 points or 0.15% to 12,841.03 and France’s CAC was down by 10.70 points or 0.19% to 5,501.06.

Asian equity markets closed mostly lower on Monday after technology stocks led a slide in US stocks on Friday. The dollar held steady against its peers while oil traded mixed after the release of US GDP data and amid renewed concerns around the US-China trade war. Meanwhile, investors shifted their focus to key central bank meetings this week. The Bank of Japan (BoJ) began a two-day policy meeting today, with expecting the central bank to discuss reducing investments in ETFs tracking the Nikkei 225 index. The Federal Open Market Committee is widely expected to leave interest rates unchanged when it meets on Tuesday and Wednesday. Chinese stocks ended lower, dragged down by healthcare stocks after Changchun Changsheng Bio-technology became the latest pharmaceutical company to be embroiled in a vaccine scandal. Further, Japanese shares closed down as investors awaited cues from the BoJ meeting and the next batch of corporate earnings.