Slowing factory, GST revenue growth drag markets lower

Easing microeconomic data dragged the Indian equity markets lower on Wednesday, with both the larger peers, Sensex and Nifty, saw a drastic loss of around 1% each. The start of the day was lackluster, as the government once again missed its Rs 1 lakh crore target of gathering revenue from Goods and Services Tax (GST) in the month of December 2018. The GST collection declined to Rs 94,726 crore in December, lower than Rs 97,637 crore collected in November. The fall in revenue collection raised concerns that the government may not be able to contain the fiscal deficit to 3.2% of the Gross Domestic Product (GDP). Domestic sentiments got further hit after the Indian manufacturing sector slowed down in the month of December, despite easing cost inflationary pressures. Growth was curtailed by competitive pressures, labour issues and challenging public policies. As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance - eased to 53.2 in December from 54 in November. The market participants also got cautious with a private report stating that the Reserve Bank of India's (RBI) estimates of the gross non-performing asset (GNPA) ratio, in severe stress scenarios, for the quarter ahead have been inaccurate five out of six times in its financial stability reports (FSR) since FY16.

In the second half of the session, the equity benchmarks saw steep fall, on the back of weak cues from European and Asian markets. Adding to the worries, Anil Gupta, vice president of ICRA said that MSME restructuring scheme will spoil credit culture because earlier the borrowers were sticking to their repayment schedule but now with this forbearance definitely any borrower will try to get a restructuring with a longer repayment schedule. So overall it is not good for the credit culture. Traders failed to take any sense of relief with reports that the government has waived late fees for non-filers of summary and final sales returns for the July 2017-September 2018 period by businesses registered under the GST. The market participants even overlooked a report showing that India remained ahead of China to retain the tag world’s fastest growing large economy withstanding several ups and downs, spike in oil prices and global trade war like situation during 2018. Indian economy’s roller-coaster ride during the year gone by was best captured by the Gross Domestic Product (GDP) growth. In the first quarter of 2018-19 ending June 30, it grew at an impressive 8.2%.

On the global front, European markets were trading in red, as traders return to their desks after the New Year break. Adding some worries, Eurozone manufacturing PMI stood at 51.4 in December, down from November's 51.8 and the lowest since February 2016. Investors look ahead to Friday's US December jobs report as well as the annual meeting of the American Economic Association, where Fed Chair Powell is interviewed with predecessors Janet Yellen and Ben Bernanke, for clues on the outlook for interest rates. Asian markets ended in red, after China's manufacturing sector contracted for the first time in 19 months in December, due to ongoing trade frictions between the world's two largest economies. The Caixin/Markit manufacturing PMI dropped to 49.7 from 50.2 in November.

Back home, realty stocks ended lower, despite reports that the GST Council is slated to meet on January 10 to discuss lowering GST on under-construction flats and houses to 5 per cent, as well as hiking exemption threshold for small and medium enterprises, while auto industry stocks also fell, after the auto companies such as Eicher Motors, Mahindra and Mahindra, Tata Motors and Maruti Suzuki India reported lower-than-expected auto sales numbers for the month of December. Further, stocks related to the food processing industry were in focus with CEO Pawan Agarwal’s statement that regulator FSSAI will focus on enforcing the regulations without impacting businesses, while shares of metal companies edged lower after reports said foreign brokerage firm CLSA has downgraded the stocks saying deteriorating Chinese demand outlook will weigh on commodity prices.

Finally, the BSE Sensex lost 363.05 points or 1.00% to 35,891.52, while the CNX Nifty was down by 117.60 points or 1.08% to 10,792.50.

The BSE Sensex touched a high and a low of 36,236.70 and 35,734.01, 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 plunged 1.26%, while Small cap index was down by 0.74%.

The only gaining sectoral indices on the BSE were IT up by 0.28% and TECK up by 0.03%, while Metal down by 3.45%, Auto down by 3.01%, Consumer Disc down by 1.83%, Basic Materials down by 1.75% and Utilities down by 1.71% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 1.66%, TCS up by 1.09%, Asian Paints up by 0.71%, Infosys up by 0.70% and Yes Bank up by 0.22%. On the flip side, Vedanta down by 4.48%, Tata Steel down by 4.21%, Mahindra & Mahindra down by 4.15%, Tata Motors - DVR down by 3.22% and Tata Motors down by 2.91% were the top losers.

Meanwhile, in order to provide some relief to taxpayers, the government has come up with the new annual Goods and Services Tax (GST) return forms. The new forms are required to be filed by businesses registered under the GST regime by June 30, 2019.

The Central Board of Indirect Taxes and Customs (CBIC) has notified form GSTR-9 is the annual return form for normal taxpayers, GSTR-9A is for composition taxpayers and GSTR-9C is a reconciliation statement. In the annual return forms, businesses have to provide consolidated details of sales, purchases and input tax credit (ITC) benefits accrued to them during the 2017-18 fiscal.

Trade and industry bodies had raised several objections on the GST annual return filing forms, which were earlier notified in September last year. Following this, the CBIC has notified the new forms. Initially, the due date for filing the annual return form was set at December 31, 2018. In view of industry concerns, the government then extended the date till March 31, 2019. The GST Council in its recent meeting on December 22, 2018, has decided to extend the due date further to June 30, 2019.

The CNX Nifty traded in a range of 10,895.35 and 10,735.05. There were 09 stocks advancing against 41 stocks declining on the index.

The top gainers on Nifty were Sun Pharma up by 1.48%, Bharti Infratel up by 1.12%, TCS up by 0.85%, Asian Paints up by 0.62% and Infosys up by 0.44%. On the flip side, Eicher Motors down by 9.40%, JSW Steel down by 5.44%, Tata Steel down by 4.51%, Vedanta down by 4.40% and Mahindra & Mahindra down by 4.24% were the top losers.

All European markets were trading in red; UK’s FTSE 100 fell 72.11 points or 1.07% to 6,656.02, Germany’s DAX lost 50.79 or 0.48% points to 10,508.17 and France’s CAC was down by 88.55 points or 1.87% to 4,642.14.

Asian markets ended in red on Wednesday as the US government shutdown entered its 12th day and a private survey showed that China's manufacturing sector contracted for the first time in 19 months in December, due to ongoing trade frictions between the world's two largest economies. Chinese shares ended lower as the Caixin/Markit manufacturing PMI dropped to 49.7 from 50.2 in November, adding to investor concerns over slowing growth. Further, Singapore and Malaysia shares were down around 1 percent in the absence of fresh overnight cues from Wall Street and Europe, which were closed for the New Year's Day holiday. Meanwhile, markets in Japan remained closed for the New Year holidays.