Late sell-off shakes Dalal Street; Sensex loses over 300 points

Indian equity benchmarks witnessed sharp fall on Tuesday, with both the larger peers, the Sensex and Nifty, closing below their crucial psychological levels of 38,300 and 11,500, respectively. After a firm start, key indices remained positive for the most part of the session, aided by a private report stating that if the BJP-led National Democratic Alliance (NDA) gets a second term, it will provide liquidity support to non-banking financial companies (NBFCs) that are facing cash crunch for a year now. Traders were optimistic, as the government said that India and the United States will engage regularly to resolve outstanding trade issues. Both sides agreed to deepen economic cooperation and bilateral trade by ensuring greater cooperation amongst stakeholders, including Government, businesses and entrepreneurs.

However, the markets erased all of their gains in the last leg of the trade to end in red terrain, impacted by S&P Global Ratings’ latest report stating that goods and Services Tax (GST) regime in India is not likely to reduce the deficits of state governments significantly, amid large and growing expenditure mandates for the social sector as well as capital spending. Some concerns also came with a private report stating that the weak volume growth reported by consumer staple companies in Q4, FY19 underlines the slowdown seen in housing over the past five to six years and automobiles over the past year. The next government may have its task cut out to revive flagging economic growth. Adding more worries among traders, the head of the International Monetary Fund said that fresh trade tensions between the United States and China were the main threat to the world economy.

On the global front, European markets were trading in red, as Eurozone private sector grew to the slowest pace in three months in April, due to the weaker performance in both manufacturing and services sectors. The final data from IHS Markit's purchasing managers' survey showed that the final Eurozone Composite Purchasing Managers' Index, or PMI, fell to a three-month low of 51.5 in April from 51.6 in March. The flash reading was 51.3. Asian markets ended in green, even though Indonesia's economy grew at a slower pace in the first quarter of the year amid weaker exports and investment. The preliminary data from the statistical bureau showed that Gross domestic product grew 5.07 percent year-on-year following a 5.18 percent expansion in the previous three months.

Back home, power sector remained in focus with credit rating agency Crisil’s report stating that total debt of state-owned discoms is set to increase to pre-Uday levels of Rs 2.6 trillion by the end of this fiscal year, as many states have limited fiscal headroom to continue to support them. The report noted that improvement in operations may face challenges because the focus on new rural connections without adequate tariff hikes can increase losses.

Finally, the BSE Sensex slipped 323.71 points or 0.84% to 38,276.63, while the CNX Nifty was down by 100.35 points or 0.87% to 11,497.90.

The BSE Sensex touched a high and a low of 38,835.54 and 38,236.18, respectively and there were 06 stocks advancing against 25 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.98%, while Small cap index was down by 0.85%.

The few gaining sectoral indices on the BSE were IT up by 0.19%, Capital Goods up by 0.19% and Consumer Durables up by 0.04%, while Telecom down by 2.44%, Energy down by 2.23%, Oil & Gas down by 1.36%, Realty down by 1.32% and Bankex down by 1.25% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 1.37%, Larsen & Toubro up by 1.14%, Power Grid up by 0.84%, Infosys up by 0.79% and ONGC up by 0.73%. On the flip side, Tata Motors - DVR down by 4.65%, Tata Motors down by 4.60%, ICICI Bank down by 3.77%, Bharti Airtel down by 3.10% and Reliance Industries down by 2.91% were the top losers.

Meanwhile, the Central Board of Direct Taxes (CBDT) has refuted media reports pertaining to reduction in numbers of Income Tax Returns (ITR) e-filed during Financial Year (FY) 2018-19 as compared to FY 2017-18. It said this is factually untrue, because the figures for FY18 and FY19 are not directly comparable. During FY18, out of a total of 6.74 crore ITRs which were e-filed, 5.47 crore ITRs were filed for Assessment Year (AY) 2017-18. In comparison, during FY19, a total of 6.68 crore ITRs were e-filed which included 6.49 crore ITRs of current AY 2018-19 marking an increase of almost 19%. This would imply that substantially larger number of taxpayers filed their ITRs electronically in the FY19 as compared to FY18.

During FY18, apart from the returns for the AY18, nearly 1.21 crore ITRs were filed for AY17. The balance number of ITRs filed for AY16 and prior AYs is 0.06 crore. In comparison, during FY19 only 0.14 crore ITRs for AY18 were filed. Thus, the apparent decrease in the number of ITRs filed during FY19 pertaining to earlier years was due to an amendment in Section 139(5) of the Income-tax Act, 1961 brought in vide Finance Act, 2017, with effect from April 01, 2018, which mandated that a revised return could be furnished only up to the end of the relevant Assessment Year.

As a result, only 0.14 crore ITRs pertaining to AY18 were filed during FY19 as these were the revised ITRs for the relevant AY which could only be filed due to change in law and no other ITR of any earlier AY could be filed in view of the amended provisions of law. It also stated that the number of paper ITRs for AY18 was only 9.2 lakh (1.5% of total ITRs filed) and the number of paper ITRs for AY19 is 4.8 lakh (0.6% of total ITRs filed).

The CNX Nifty traded in a range of 11,657.05 and 11,484.45. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were Hindustan Unilever up by 1.71%, Bharti Infratel up by 1.38%, Larsen & Toubro up by 1.17%, Hindalco up by 1.06% and Wipro up by 0.91%. On the flip side, Tata Motors down by 4.90%, Zee Entertainment down by 4.33%, ICICI Bank down by 3.76%, Reliance Industries down by 3.17% and JSW Steel down by 2.98% were the top losers.

European markets were trading in red, France’s CAC fell 36.18 points or 0.66% to 5,447.34, Germany’s DAX slipped 67.29 points or 0.55% to 12,219.59 and UK’s FTSE 100 was down by 71.74 points or 0.97% to 7,308.90.

Asian markets ended higher on Tuesday. Chinese shares ended higher after the People's Bank of China announced it would reduce the required reserve ratio for some small and medium-sized banks. China's commerce ministry said that Vice Premier Liu He would visit the United States on May 9 and May 10 for bilateral trade talks at the invitation of senior US officials. The Japanese and South Korean markets, which resumed trading after holidays, fell sharply while markets elsewhere across the region regained some ground after steep losses in the previous session.