Indices once again close at record closing highs on Tuesday

Indian equity benchmarks once again settled at record closing highs on Tuesday, led by strong buying in Banking, Finance and IT stocks. The benchmarks staged a gap down opening, mirroring losses in other Asian markets. Sentiments remained down-beat with report that under the Trump administration, US-India tensions have increased over each side’s tariff policies. It also noted that the two sides have also held concerted negotiations to address these trade frictions. Some concern also came amid reports that India's tax pie seems to have undergone a subtle change with a sharp drop in direct tax collections resulting from a disproportionate impact of the COVID-19 carnage on incomes. Market participants also took a note of Union Health and Family Welfare Minister Dr Harsh Vardhan’s statement that the coronavirus pandemic has turned the clock back by many years and the lockdowns have raised insurmountable barriers and imposed many roadblocks.

However, late hour buying helped benchmarks recover from intraday lows and settled higher. Some optimism also came with Minister of State for Finance Anurag Thakur’s statement that the central government is making efforts to turn India into a manufacturing and export powerhouse. Thakur said manufacturing will now be broad-based in the country. Besides, the Ministry of Finance has released the 10th weekly instalment of Rs 6,000 crore to the States. Out of this, an amount of Rs 5,516.60 crore has been released to 23 States and an amount of Rs 483.40 crore has been released to the 3 Union Territories (UT) with Legislative Assembly (Delhi, Jammu & Kashmir & Puducherry) who are members of the GST Council. The remaining 5 States, Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim do not have a gap in revenue on account of GST implementation.

On the global front, Asian markets ended mostly higher on Tuesday, despite a persisted surge in coronavirus cases in several parts of the world. Investors also remained on sidelines ahead of two key Senate run-off elections in Georgia later today that will determine which party controls the Senate and could also have a major impact on President-elect Joe Biden's economic policies.  European markets were trading mostly in red, as concerns about a new variant coronavirus and new lockdowns cast a shadow on the economic outlook. However, data from Destatis revealed that German retail sales grew more than expected in November driven by non-food retailing. In November, retail turnover climbed by a real 5.6 percent from the previous year, which was faster than the expected growth of 3.9 percent but slower than the 8.6 percent increase logged in October. On a monthly basis, retail sales grew unexpectedly by 1.9 percent. Economists had forecast a month-on-month fall of 2 percent after a 2.6 percent rise in October.

Finally, the BSE Sensex rose 260.98 points or 0.54% to 48,437.78, while the CNX Nifty was up by 66.60 points or 0.47% to 14,199.50.

The BSE Sensex touched high and low of 48,486.24 and 47,903.38, respectively and there were 15 stocks advancing against 15 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 1.38%, while Small cap index was up by 0.71%.

The top gaining sectoral indices on the BSE were Bankex up by 1.48%, Finance up by 1.31%, IT up by 1.23%, TECK up by 1.06% and Consumer Discretionary up by 0.96%, while Metal down by 1.36%, Energy down by 1.08%, Realty down by 0.39%, Oil & Gas down by 0.33% and Basic Materials down by 0.13% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 6.31%, HDFC up by 2.78%, Indusind Bank up by 2.68%, TCS up by 1.75% and Asian Paints up by 1.40%. On the flip side, ONGC down by 2.06%, Bajaj Finance down by 1.83%, NTPC down by 1.31%, Mahindra & Mahindra down by 1.24% and Reliance Industries down by 1.24% were the top losers.

Meanwhile, India's tax pie seems to have undergone a subtle change with a sharp drop in direct tax collections resulting from a disproportionate impact of the COVID-19 carnage on incomes. The share of indirect taxes, which mainly comprise of levy on goods and services as well as import duty, has risen while that of direct taxes - made up of corporate and personal income tax - has gone down in 2020.

Finance Secretary Ajay Bhushan Pandey has said that in a pandemic like this where the economy has been impacted, any large scale changes impact direct taxes more severely, whereas indirect tax collection is mostly proportional to business turnover and compliance. He also said 'in a situation like this where the economy has been impacted and we are on the recovery path, the direct taxes are impacted more severely because the profitability of a company is not directly proportional to the turnover always. If your turnover reduces below a certain benchmark then the profit will not merely reduce, but it may get into a negative zone and therefore the company may not pay any income tax as it will be into a loss.'

Pandey said ‘similarly, when we are in a recovery phase, the companies will take a longer time to come into the profitable zone to pay income tax. In the case of indirect tax, it is more or less proportional to the business volume and turnover and compliance’.

The CNX Nifty traded in a range of 14,215.60 and 14,048.15 and there were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 6.32%, HDFC up by 2.96%, Indusind Bank up by 2.67%, HDFC Life Insurance up by 2.54% and Wipro up by 2.30%. On the flip side, ONGC down by 1.96%, JSW Steel down by 1.87%, Hindalco down by 1.77%, Tata Steel down by 1.73% and Bajaj Finance down by 1.60% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 8.75 points or 0.16% to 5,580.21 and Germany’s DAX decreased 28.93 points or 0.21% to 13,697.81, while UK’s FTSE 100 increased 25.38 points or 0.39% to 6,597.26.

Asian markets ended mostly higher on Tuesday, despite concerns over persisted surge in corona virus cases. Chinese shares ended up after the New York Stock Exchange said it is withdrawing plans to delist China's three big telecommunication companies. Though, Japanese shares settled lower amid the yen strengthened following reports that the government will declare a state of emergency in Tokyo and surrounding cities from Thursday. Uncertainty ahead of crucial Senate election run-offs in the US state of Georgia has capped further gains.