Sensex, Nifty settle at record closing high for third straight session

In a volatile trade, key Indian bourses, Sensex and Nifty settled at record closing high points for third straight session on Tuesday. After a positive start, the markets traded volatile throughout the session, impacted with the Federation of Indian Chambers of Commerce & Industry’s (FICCI) statement that India’s slowing economic growth is of serious concern and the country needs to urgently cut tax and interest rates to revive the economy. FICCI made a strong case for fiscal stimulus to pump-prime the slowing economy amid global headwinds and weakening domestic demand in the next budget as the Narendra Modi government is all set to begin its second innings. Traders also remained worried with India Ratings and Research’s (Ind-Ra) latest report stating that India’s gross domestic product (GDP) is likely to grow at 6.9 percent in the fiscal 2018-19 (FY19), slightly lower than Central Statistics Office’s (CSO) advance estimate of 7 percent.

However, in the last leg of the trade, key indices managed to stage recovery and ended the trading session in green terrain, amid reports that the commerce and industry ministry is considering a major export promotion scheme to ensure expeditious refund of all un-rebated central and state levies and taxes imposed on inputs that are consumed in exports of all sectors. Adding optimism among the market participants, eminent economist Arvind Panagariya said that the new government can start by cutting corporate tax to 25 percent and removing exemptions. Meanwhile, Industry body Confederation of Indian Industry (CII) has called for lowering corporate tax rate, kick-starting government expenditure and rationalization of dispute tax resolution mechanism.

On the global front, European markets were trading in red, as Germany's consumer confidence is set to drop slightly in June. The survey data from the market research group GfK showed that the forward-looking consumer confidence index fell slightly to 10.1 in June from revised 10.2 in May. Besides, Switzerland's exports fell for the second month in April, while imports rose. The data from the Federal Customs Administration showed that exports declined a real 0.6 percent month-on-month in April, following a 0.5 percent fall in March. Asian markets ended mostly in green.

Back home, stocks related to the oil industry ended higher, even though data report from Ministry of Petroleum & Natural Gas showed that crude oil production during April, 2019 was 2712.61 TMT which is 0.27% lower than the target and 6.94% lower when compared with April, 2018. Further, logistic industry stocks remained in watch, after the commerce ministry has proposed creation of a separate department for trade facilitation and logistics for better coordination among different government units. The proposal is part of a 100-day action plan prepared by the ministry for the new government, which will take office on May 30.

Finally, the BSE Sensex gained 66.44 points or 0.17% to 39,749.73, while the CNX Nifty was up by 4.00 points or 0.03% to 11,928.75.

The BSE Sensex touched a high and a low of 39,828.65 and 39,498.65, respectively and there were 14 stocks advancing against 17 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.09%, while Small cap index was up by 0.41%.

The top gaining sectoral indices on the BSE were IT up by 1.64%, TECK up by 1.36%, Energy up by 1.17%, Metal up by 0.95% and Oil & Gas up by 0.55%, while Telecom down by 1.16%, Capital Goods down by 0.77%, Auto down by 0.57%, Industrials down by 0.23% and Consumer Durables down by 0.10% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 4.06%, Coal India up by 2.72%, Infosys up by 2.47%, Power Grid up by 1.90% and Vedanta up by 1.68%. On the flip side, Hero MotoCorp down by 2.55%, Bajaj Auto down by 2.35%, Bharti Airtel down by 1.43%, Larsen & Toubro down by 1.19% and Bajaj Finance down by 1.02% were the top losers.

Meanwhile, CRISIL, a global analytical company providing ratings, research, and risk and policy advisory services, in its latest report has said profitability of Information Technology (IT) companies is likely to be impacted by adverse policies like the one on H1-B visas in the key US market, with margins estimated to narrow by up to 0.80 per cent in current financial year (FY20). Though, ratings agency said revenues are set to rise by 7-8 per cent in dollar terms for the over $180 billion industry in FY20 on the back of faster growth in digital services.

It is expecting the industry's operating margins will narrow by 0.30-0.80 per cent largely on an increase in local hires which the industry has been forced into due to the policy framework in its markets. It said nearly 65 per cent of the operating expenses for an IT player are towards employees, adding that the same grew by a faster clip of 17 per cent for tier-I players in FY2018-19 as against 6 per cent earlier. It highlighted that ever since the US government tightened its H1-B visa policy in 2017, challenges have mounted for the sector as Indian-origin employees were the largest consumers of H1-B visas at 63 per cent of initial employment.

The US reduced both the number of visas available and also set a minimum floor of salary to be offered, making it difficult for the Indian IT sector. Typically, an Indian-origin employee with an H1-B visa would cost 20 per cent lower than hiring the same talent locally. Besides, it mentioned lower unemployment of under 2 per cent in the US technology sector as against an overall unemployment of under 4 per cent means talent availability is limited and it will lead to higher costs, adding profits will continue to be under pressure in the future as well.

The CNX Nifty traded in a range of 11,958.55 and 11,864.90. There were 21 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 5.26%, Yes Bank up by 4.50%, Infosys up by 2.56%, Coal India up by 2.29% and Power Grid up by 1.95%. On the flip side, Bharti Infratel down by 4.06%, Bajaj Auto down by 3.09%, Hero MotoCorp down by 2.56%, Grasim Industries down by 2.54% and Ultratech Cement down by 1.74% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 19.13 points or 0.36% to 5,317.06 and Germany’s DAX fell 29.14 points or 0.24% to 12,042.04, while UK’s FTSE 100 increased 3.16 points or 0.04% to 7,280.89.

Asian markets ended mostly in green on Tuesday, with relief over EU election results and US President Donald Trump's softer approach on trade in his meeting with Japan's prime minister helping underpin investor sentiment. Meanwhile, Trump said Monday that Washington was not ready to make a deal with Beijing but he expected one in the future. Chinese shares closed higher for a second straight session ahead of an increase in MSCI's weighting of Chinese mainland shares. Expectations of policy support also boosted sentiment. Further, Japanese shares ended up after Trump said a trade deal between Japan and the US would be struck in August. Japan's Economy Minister Toshimitsu Motegi said Trump's comments probably reflected his hope for quick progress in negotiations.