Benchmarks trade slightly higher in early deals

Indian equity benchmarks made positive start on Thursday tracking overnight gains on Wall Street. Markets are trading above neutral lines in early deals, supported by buying in Auto, Consumer Durables and Capital Goods stocks. Traders are eyeing Finance Minister Nirmala Sitharaman’s review meeting with heads of banks and NBFCs on September 3 for smooth and speedy implementation of the one-time debt recast for resolution of COVID-19 related stress in bank loans. Also, investors are looking ahead to the Services PMI data for August which is scheduled to be released later in the day. Some support came in with report that India has moved four places on the Global Innovation Index (GII) 2020 to rank at 48 since 2019. This makes it the third-most innovative lower middle-income economy in the world, according to the report. India at the 48th place also retains the highest rank in the central and southern Asia region. Though, rising tensions between India and China on the Line of Actual Control (LAC) and increasing coronavirus cases in the country kept upside in check. India has recorded its highest-ever single-day spike of nearly 83,000 in new coronavirus cases.

On the global front, Asian markets were trading mixed amid report that the latest survey from Jibun Bank revealed that the services sector in Japan continued to contract in August, and at a slightly faster pace, with services PMI score of 45.0. That's down from 45.4 in July and it moves farther beneath the boom-or-bust line of 50 that separates expansion from contraction. However, losses were capped amid optimism about the economic recovery and on hopes of additional U.S. stimulus. Data showing that China's services sector continued to expand in August also lifted investors’ sentiment.

Back home, India banned more than 100 mobile applications including the hugely popular mobile gaming app PUBG, after banning 59 Chinese apps in the first round earlier this year. The apps were banned citing concerns of data security after fresh tensions between India and China in the border area in eastern Ladakh. Aviation stocks were in focus with report that in further easing of restrictions, the government permitted Indian airlines to increase the number of domestic passenger flights to 60 per cent of their pre-COVID services.

The BSE Sensex is currently trading at 39122.98, up by 36.95 points or 0.09% after trading in a range of 39061.79 and 39236.36. There were 19 stocks advancing against 11 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.45%, while Small cap index was up by 0.78%.

The top gaining sectoral indices on the BSE were Auto up by 1.12%, Consumer Durables up by 1.08%, Capital Goods up by 1.07%, Industrials up by 0.96%, IT up by 0.92%, while Metal down by 0.69%, Energy down by 0.52%, Bankex down by 0.19%, Utilities down by 0.15%, Realty down by 0.14% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 1.42%, Titan Company up by 1.35%, TCS up by 1.33%, Maruti Suzuki up by 1.18% and Tech Mahindra up by 0.94%. On the flip side, ICICI Bank down by 1.34%, Bajaj Finance down by 1.30%, Power Grid down by 1.27%, Indusind Bank down by 1.01% and Bharti Airtel down by 0.76% were the top losers.

Meanwhile, Federation of Indian Export Organisations (FIEO) has said that the government's decision to cap export incentives under the Merchandise Exports from India Scheme (MEIS) at Rs 2 crore per exporter on exports made between September 1, 2020 to December 31, 2020 is going to seriously affect traders and cause uncertainty. FIEO President Sharad Kumar Saraf has said exports that will be made during September-December, 2020 are based on the orders, which have already been negotiated much earlier, factoring the existing MEIS benefit. He also expressed concern over the financial outlay of Rs 5,000 crore given for exports during September-December, 2020 with the condition that if claims exceed this limit, the ceiling may further be revised downwards.

FIEO President stated that this will create huge uncertainty as those eligible for a cap of Rs 2 crore will not be able to factor even such benefits in their exports. He said clarity is also required whether any change in the MEIS rate will be notified for those who are not affected by the cap if the amount of Rs 5,000 crore is exhausted. Further, he urged the government to extend the MEIS till March 31, 2021, coterminous with the existing Foreign Trade Policy.

Saraf further said that the RoDTEP (Remission of Duties or Taxes on Export Product) committee has started the work, but the industry is facing challenges in providing the data due to frequent local lockdowns, non-availability of transport and non-functioning of auditors. Moreover, he noted that fixation of rate for over 10,000 items at 8 digits would be a time-consuming exercise, particularly as it has to meet the discipline of WTO.

The CNX Nifty is currently trading at 11555.65, up by 20.65 points or 0.18% after trading in a range of 11534.95 and 11584.95. There were 35 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 5.53%, UPL up by 2.85%, Wipro up by 2.16%, Grasim Industries up by 1.89% and Titan Co up by 1.71%. On the flip side, Hindalco down by 1.58%, ICICI Bank down by 1.45%, Bajaj Finance down by 1.26%, Power Grid down by 1.16% and Indusind Bank down by 0.97% were the top losers.

Asian markets were trading mixed; Straits Times declined 13.68 points or 0.54% to 2,526.26, Hang Seng fell 77.44 points or 0.31% to 25,042.65, Jakarta Composite lost 27.99 points or 0.53% to 5,283.98 and Shanghai Composite was down by 2.11 points or 0.06% to 3,402.69. On the other hand, Nikkei 225 surged 301.88 points or 1.30% to 23,549.03, Taiwan Weighted rose 66.11 points or 0.52% to 12,765.61 and KOSPI jumped 33.85 points or 1.43% to 2,398.22.