Local equities turn positive; Sensex above 39,700 mark

Local equity benchmarks erased all the losses to turn positive in morning session. Metal, IT and Energy have elevated with gains on their respective front line stocks. Some optimism came with a report that the commerce and industry ministry has proposed a customised incentive package to attract foreign investments in sectors such as electronics, chemicals and food processing. Traders took note of a report that the government is weighing a major promotion scheme to ensure fast refund of central and state taxes and levies to soften the blow of an ongoing global trade war. Meanwhile, a report stated that Industry body Confederation of Indian Industry (CII) has called for lowering corporate tax rate, kick-starting government expenditure and rationalisation of dispute tax resolution mechanism. However, gains remain capped with SBI’s report that the country’s economic growth in the fourth quarter ended March 2019 is expected to moderate to 6.1-5.9%, which could pull down growth rate for the entire fiscal 2018-19 to below 7%. Some concern also came with a report that weakness in consumer spending and softening commodity prices have led India Inc. to deliver a six-quarter low revenue growth of 10.7 per cent for January-March period.

On the global front, Asian markets were trading mixed, in the absence of major market-driving news on trade negotiations during the visit of President Donald Trump to Japan. Back home, rating agency Indian Rating stated that India’s GDP growth during the fiscal 2018-19 is expected at 6.9%, marginally lower than CSO’s advance estimate of 7% and urged the new government to take short-term measures to arrest slowdown in the economy.

The BSE Sensex is currently trading at 39704.08, up by 20.79 points or 0.05% after trading in a range of 39584.26 and 39785.02. There were 19 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.28%, while Small cap index was up by 0.39%.

The top gaining sectoral indices on the BSE were Metal up by 1.57%, IT up by 1.23%, Energy up by 1.14%, TECK up by 0.94% and Utilities was up by 0.73%, while Telecom down by 1.11%, Capital Goods down by 0.69% and BANKEX was down by 0.19% were the few losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 5.42%, Coal India up by 2.75%, Tata Motors - DVR up by 2.18%, Tata Motors up by 2.01% and TCS was up by 1.55%. On the flip side, HDFC down by 1.83%, Kotak Mahindra Bank down by 1.28%, Hero MotoCorp down by 1.21%, Larsen & Toubro down by 1.03% and Bharti Airtel was down by 0.80% 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 is currently trading at 11927.55, up by 2.80 points or 0.02% after trading in a range of 11891.55 and 11958.55. There were 27 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were Yes Bank up by 5.42%, Coal India up by 2.70%, JSW Steel up by 2.55%, Hindalco up by 2.27% and Zee Entertainment was up by 2.16%. On the flip side, Bharti Infratel down by 3.58%, HDFC down by 1.88%, Grasim Industries down by 1.53%, Kotak Mahindra Bank down by 1.20% and Hero MotoCorp was down by 1.10% were the top losers.

Asian markets were trading mixed; Hang Seng increased 124.71 points or 0.46% to 27,412.80, Nikkei 225 surged 94.89 points or 0.45% to 21,277.47, Shanghai Composite gained 25.74 points or 0.89% to 2,918.12 and KOSPI was up by 3.88 points or 0.19% to 2,048.09.

On the other side, Taiwan Weighted dropped 1.78 points or 0.02% to 10,332.35, Straits Times trembled 6.00 points or 0.19% to 3,164.77 and Jakarta Composite was down by 21.62 points or 0.35% to 6,077.35.