Weakness persists in markets in afternoon deals

Indian benchmark indices continued to trade in red in afternoon session due to selling in frontline blue chip stocks. The sentiment remained dull with former finance secretary Subhash Chandra Garg’s statement that the government's tax collection is likely to fall short of its estimate by Rs2.5 lakh crore or 1.2% of GDP in 2019-20, and called for scrapping of dividend distribution tax. Investors failed to take any sense of relief with Union Road Transport and Highways Minister Nitin Gadkari’s statement that the goal of making India a $5 trillion economy by 2024 was difficult but not impossible. He added that it can be achieved by increasing domestic production and reducing dependence on imports. Moreover, disappointing quarterly earnings by some blue- chip companies, too weighed on the sentiments. On the sectoral front, jewellery stocks remained in focus with private report stating that India's gold loan market is expected to reach Rs 4,617 billion by 2022 at a five-year compounded annual growth rate of 13.4 percent. It also said the 2018-19 fiscal year saw gold loan companies aggressively expanding their branch network across the northern and eastern states in the country.

On the global front, Asian markets were trading mixed as the focus now turned to the release of corporate earnings results this week. Back home, the BSE Sensex is currently trading at 41769.38, down by 175.99 points or 0.42% after trading in a range of 41708.94 and 42273.87. There were 10 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.20%, while Small cap index was down by 0.10%.

The top gaining sectoral indices on the BSE were Telecom up by 1.75%, Utilities up by 0.90%, Power up by 0.83%, Realty up by 0.45% and FMCG was up by 0.18%, while Energy down by 1.34%, IT down by 0.83%, Metal down by 0.64%, Auto down by 0.54% and TECK was down by 0.52% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid up by 3.47%, ICICI Bank up by 1.71%, Asian Paints up by 1.46%, Bharti Airtel up by 1.26% and ITC was up by 0.73%. On the flip side, TCS down by 1.95%, Reliance Industries down by 1.81%, Axis Bank down by 1.43%, HDFC Bank down by 1.22% and Hero MotoCorp was down by 1.07% were the top losers.

Meanwhile, with no view of including jet fuel under the ambit of Goods and Services Tax (GST) in near future, the government is mulling levying specific rate of excise duty on aviation turbine fuel (ATF) in place of current ad valorem rates to insulate its prices from cascading effect in times of volatile prices. ATF currently is chargeable at 11 percent ad valorem rate of excise duty. Concessional rate of 2 percent is applicable for ATF sold under Regional Connectivity Scheme. Ad valorem rate means that the impact of an increase in price of the fuel because of global rate hike translates into an even higher price for airlines as the tax incidence also rises.

To protect airlines from such volatility, the government may in the upcoming Budget for 2020-21 fiscal year may bring specific excise duty expressed in Rs per kiloliter. Petrol and diesel already attract a specific rate of excise duty and so ATF naturally qualifies for such a shift. If cost of production of ATF is Rs 100 per kilolitre, the fuel at exit from the refinery will be priced at Rs 111 per kilolitre after levying 11 per cent excise duty. If the cost rises to Rs 110, the ex-refinery rate would attract an excise duty of Rs 12. A specific duty of say Rs 11 per kilolitre would mean that even if the cost goes up the tax incidence would remain the same. Petrol and diesel already attract specific excise duty for the same purpose. Excise duty on petrol currently is Rs 21.16 per litre and that on diesel is Rs 15.83 a litre.

This would ensure correct payment of duty at the initial clearance stage itself and will eliminate complexities and difficulties in redetermination of duty on further stock transfers which sometime result in avoidable litigation. Specific excise duty would address part of the concerns of oil companies and airlines of not being able to set of tax paid on inputs against the tax on final product as ATF has been kept out of GST regime. When the GST was rolled out on July 1, 2017 amalgamating 17 central and state levies, five commodities namely crude oil, natural gas, petrol, diesel, and ATF were kept out of its purview given the revenue dependence of state governments on this sector.

The CNX Nifty is currently trading at 12296.25, down by 56.10 points or 0.45% after trading in a range of 12277.20 and 12430.50. There were 15 stocks advancing against 35 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 3.99%, Power Grid up by 3.62%, ICICI Bank up by 1.61%, Asian Paints up by 1.51% and BPCL was up by 1.47%. On the flip side, Indian Oil Corp down by 3.75%, Zee Entertainment down by 3.25%, Adani Ports &SEZ down by 2.19%, TCS down by 2.03% and Reliance Industries was down by 1.81% were the top losers.

Asian markets were trading mixed; Nikkei 225 surged 42.25 points or 0.18% to 24,083.51, Taiwan Weighted strengthened 28.42 points or 0.24% to 12,118.71, Shanghai Composite gained 14.93 points or 0.49% to 3,090.43 and KOSPI was up by 12.07 points or 0.54% to 2,262.64.

On the flip side, Straits Times trembled 7.21 points or 0.22% to 3,273.82, Jakarta Composite lost 32.03 points or 0.51% to 6,259.63 and Hang Seng was down by 161.42 points or 0.56% to 28,895.00.