Markets end in red; Sensex loses over 250 points

Indian equity benchmarks ended in red on Monday, with the both the larger peers closing trading session in deep red. The start of the day was positive, as the Goods and Services Tax (GST) Council, at its 31st meeting decided to lower tax rates on 23 goods and services, including movie tickets, TV and monitor screens and power banks, and exempted frozen and preserved vegetables from the levy. The new rates would come into effect from January 1, 2019. Sentiments were positive in early morning deals, with Finance minister Arun Jaitley expressing that the government is confident of meeting the fiscal deficit target of 3.3% of GDP for the current financial year (FY19) despite revenue loss on account of reduction in Goods and Services Tax (GST) rates. Traders also took note of Niti Aayog CEO Amitabh Kant’s statement that the government needs to incentivise angel investors eyeing startups and not tax them to give a boost to Prime Minister Narendra Modi’s flagship Startup India initiative. But, the markets soon turned volatile, after Finance Commission Chairman N.K. Singh has sounded a note of caution against fiscal slippage, saying it would adversely impact the country’s macroeconomic stability as well as investment climate. He expressed apprehension that some states are not according priority to fiscal discipline, which was not the case earlier.

In the last leg of the trade, key indices extended losses to end the session near day’s low point, impacted by Reserve Bank of India’s (RBI) data report showing the country’s foreign exchange reserves declined by $613.9 million to $393.12 billion in the week to December 14, due to fall in foreign currency assets. In the reporting week, foreign currency assets, a major component of the overall reserves, dropped by $631.6 million to $367.86 billion. Adding some more concerns, the Directorate General of GST Intelligence (DGGI) has busted a racket of fraudulent companies engaged in raising fake tax invoices worth Rs 220 crore to avail input-tax credit. Domestic sentiments also got cautious with Sebi Chairman Ajay Tyagi’s statement that the capital markets, globally, have been quite volatile during the current year and are likely to remain so in coming times on account of various factors such as US Fed rate hikes, volatile oil prices, intensifying trade conflicts and sanctions. Besides, some concerns came with reports that Reserve Bank of India has cancelled the registration of 1,490 non-banking financial companies (NBFCs). These included NBFCs that failed to meet prudential norms and those that voluntarily surrendered registration.

On the global front, European markets were trading in red, as British business investment fell for three consecutive quarters, marking its weakest period since the 2008-09 global financial crisis, as businesses reduced spending due to the Brexit chaos. Business investment decreased 1.1 percent sequentially in the third quarter, falling for a third consecutive quarter. As per the Office for National Statistics, investment declined for such a long duration for the first time since the economic downturn of 2008-2009. Meanwhile, Germany's consumer confidence is set to remain steady at the start of next year as households as the divide between expectations on overall economic situation and personal finances widened further. As per the market research group GfK, the forward-looking consumer confidence indicator is set to show a reading of 10.4 in January, unchanged from December. The street had forecast a score of 10.3 for January. Asian markets ended mixed, as investors fretted that political instability in the United States was leaving the country rudderless at a time when the global economy was showing signs of faltering.

Back home, on the sectoral front, Consumer Durables stocks ended lower, with the Goods and Services Tax (GST) Council, which met to decide on rate rationalisation of key items, keeping air conditioners in the highest tax slab, while aviation stocks ended mixed, even though Directorate General of Civil Aviation’s (DGCA) latest report showed that India's domestic air passenger traffic surged by 11.03% to 11.64 million in November 2018 as compared to 10.48 million in November 2017. The report also showed that passenger traffic during the January-November 2018 period grew by 19.21%. During in the reporting month, the passenger load factor is almost equal compared to previous month primarily on account of the ongoing tourist season. Further, stocks related to oil industry were in focus, amid reports that Oil ministers from leading OPEC nations said that they expect prices will arrest their recent slide and rebalance early next year, when a deal on new production cuts takes effect, while solar stocks remained buzzing as the GST council issued clarity on the confusion over the rates for solar power projects. It clarified that 70% of the gross value of project shall be deemed as the value of supply of said goods attracting 5% rate.

Finally, the BSE Sensex plunged by 271.92 points or 0.76% to 35470.15, while the CNX Nifty was down by 90.50 points or 0.84% to 10663.50.

The BSE Sensex touched a high and a low of 35910.67 and 35423.24, respectively and there were 6 stocks advancing against 25 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index lost 0.54%, while Small cap index was down by 1.14%.

The only gaining sectoral indices on the BSE were IT up by 0.50%, TECK up by 0.37% and Telecom up by 0.29%, while Realty down by 2.29%, Metal down by 2.16%, Basic Materials down by 1.68%, Consumer Durables down by 1.67% and Consumer Disc down by 1.58% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 1.03%, TCS up by 0.96%, Kotak Mahindra Bank up by 0.84%, Infosys up by 0.51% and Bharti Airtel up by 0.49%. On the flip side, Hero MotoCorp down by 4.27%, Bajaj Auto down by 3.11%, NTPC down by 2.55%, HDFC down by 2.44% and Tata Motors - DVR down by 2.24% were the top losers.

Meanwhile, a day after the Goods and Services Tax (GST) Council decided to lower tax rates on 23 commonly used goods and services, President of PHD Chamber of Commerce and Industry, Rajeev Talwar has expressed need to bring petroleum products under the ambit of GST to rationalise the impact of indirect taxes by subsuming VAT (Value Added Tax) and excise duties in GST, amid volatility in the international crude oil prices.

Rajeev Talwar highlighted that continuous reforms in the policy environment would pave the way for higher, sustainable and strong economic growth trajectory going forward. Further he said that India would be a tax-compliant country in the next few years, on account of a realistic, pragmatic and prudent policy approach.

President of PHD Chamber hailed the GST Council's decision to reduce tax rates, noting that the move is a great relief for every segment of the society. Besides, Talwar said that the shift in items from higher tax slabs to lower tax slabs is the visible intent of the government to constantly reforming the taxation system to make it more and more simple.

The CNX Nifty traded in a range of 10,782.30 and 10,649.25. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 1.94%, TCS up by 1.38%, Wipro up by 1.23%, Mahindra & Mahindra up by 0.90% and Kotak Mahindra Bank up by 0.88%. On the flip side, JSW Steel down by 5.16%, Hero MotoCorp down by 4.76%, Indian Oil Corporation down by 3.11%, Bajaj Auto down by 2.86% and Hindalco down by 2.77% were the top losers.

European markets were trading in red; UK’s FTSE 100 lost 40.09 points or 0.6% to 6,681.08 and France’s CAC was down by 44.55 points or 0.95% to 4,649.83.

Asian markets ended mixed in thin pre-Christmas trade on Monday as investors fretted about the impact of a partial US government shutdown and increasing trade tensions, with White House trade advisor Peter Navarro saying the trade war between the US and China would not come to an end in near-term. The US dollar slipped as political uncertainty weighed and Federal Reserve Bank of New York President John Williams said the US central bank is open to reconsidering its views on rate hikes next year. Oil prices inched higher in Asian trade after oil ministers from OPEC nations said they expect prices will arrest their recent slide and rebalance early next year. Chinese shares ended higher after the country's top policymakers signaled more support for the economy next year with tax cuts and other policy measures. Meanwhile, the markets in Japan and Indonesia were closed for public holidays.