Markets trade lower in early deals; Sensex sheds around 400 points

Erasing most of their previous session’s gains, Indian equity benchmarks made gap-down opening on Tuesday and are trading lower with around 0.65% cut, following steep rise in crude oil prices. Oil prices continued to rise after the European Union said it had agreed to cut 90 per cent of oil imports from Russia by the end of this year. Brent Crude futures were above $122 a barrel this morning. Investors are eyeing GDP numbers for the fourth quarter of the previous fiscal year (2021-22) to be out later in the day. As per the expectations, India's economy likely slowed in the fourth quarter and is expected to grow between 3.5-5.5 percent. Some cautiousness also came in as domestic ratings agency India Ratings said the GST has not helped states achieve the key objective of boosting their tax revenue. The rating agency said that the data does not point to any benefits to the states in the last five years since the implementation of GST (Goods and Services Tax).

Most of the Asian markets are trading higher, following the lack of cues from Wall Street overnight due to a holiday, as signs of easing COVID-19 curbs in Beijing and Shanghai as well as the announcement of more stimulus measures in China raised optimism about growth in the world's second largest economy and helped underpin sentiment. Back home, power stocks were in limelight as the federal power ministry said India plans to reduce power generation from least 81 coal-fired utilities over the next four years, in an effort to replace expensive thermal generation with cheaper green energy sources. In stock specific development, LIC shares fell as it reported a net profit of Rs 2,371.55 for March quarter, down 18% compared to the net profit of Rs 2,893 crore in the corresponding period of the previous fiscal.

The BSE Sensex is currently trading at 55536.45, down by 389.29 points or 0.70% after trading in a range of 55386.50 and 55659.58. There were 7 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.26%, while Small cap index was up by 0.45%.

The top gaining sectoral indices on the BSE were Realty up by 1.75%, Auto up by 1.00%, Consumer discretionary up by 0.52%, Industrials up by 0.42%, Metal up by 0.41%, while TECK down by 0.99%, Power down by 0.96%, IT down by 0.90%, Utilities down by 0.89%, FMCG down by 0.74% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 2.72%, Power Grid up by 1.27%, Tata Steel up by 1.03%, NTPC up by 0.50% and Dr. Reddy's Lab up by 0.38%. On the flip side, Titan Company down by 2.19%, HDFC down by 2.09%, Infosys down by 1.82%, Hindustan Unilever down by 1.69% and Sun Pharma down by 1.35% were the top losers.

Meanwhile, expressing cautiousness, domestic ratings agency India Ratings has said the Goods and Services Tax (GST) has not helped states to achieve the key objective of boosting their tax revenue. It said that the data does not point to any benefits to the states in the last five years since the implementation of GST (Goods and Services Tax). From June this year, the Centre will stop giving states any compensation for tax collection shortfall. GST compensation for a five-year period was part of the agreement between states and the central government at the time of the roll-out of the new indirect tax regime in 2017.

Several states have asked for an extension of the GST compensation. However, finance minister Nirmala Sitharaman, while presenting the Budget for FY23, has already said that the compensation period will not be extended beyond June 2022. The rating agency said ‘...the data available so far does not instill confidence with respect (of) GST achieving or is on course to achieve its two key objectives, namely it boosts the tax revenue and is beneficial for the consuming states’. It said the share of state GST (SGST) in States' Own Tax Revenue (SOTR) at 55.4 per cent during FY18-FY21 compared 55.2 per cent during FY14-FY17 indicates that the growth in both SGST and non-SGST components of SOTR has been broadly similar.

It added ‘this means the GST implementation did not result in any incremental benefit to the SOTR. Moreover, SGST growth at an average 6.7 per cent during FY18-FY21 has been lower than the 9.8 per cent growth recorded by the taxes subsumed under GST during FY14-FY17’. It also said until the GST implementation, producing/exporting states used to collect VAT (sales tax) on the sales within the states and also Central Sales Tax (CST) of up to 2 per cent on the inter-state sales. States where CST was contributing more than 4.5 per cent to their SOTR during FY12-FY17 were Assam, Chhattisgarh, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Meghalaya, Odisha, Sikkim and Tamil Nadu - a mix of both producing and consuming states.

It said after the GST implementation, the proportion of CST in SOTR declined to 0.95 per cent in FY21 (RE) from 4.16 per cent in FY17. The agency said another way of assessing the GST performance of states is to examine the SGST growth during FY19-FY22, and pointed out that Odisha is the only state having average SGST collection exceeding 14 per cent with a 20.06 per cent growth in SGST between FY19-22, and is followed by Bihar (13.89 per cent), Assam, Andhra Pradesh and Chhatisgarh. A total of 17 major states recorded average SGST growth of below 10 per cent, while Uttarakhand recorded negative average SGST growth of 4.02 per cent during FY19-FY22.

The CNX Nifty is currently trading at 16558.85, down by 102.55 points or 0.62% after trading in a range of 16521.90 and 16599.45. There were 15 stocks advancing against 35 stocks declining on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 2.57%, ONGC up by 2.01%, Coal India up by 1.58%, Bajaj Auto up by 1.55% and Power Grid up by 1.31%. On the flip side, Titan Company down by 2.27%, HDFC down by 2.13%, Infosys down by 1.76%, Hindustan Unilever down by 1.70% and Sun Pharma down by 1.33% were the top losers.

Asian markets are trading mostly in green; Straits Times rose 15.94 points or 0.49% to 3,254.86, Hang Seng surged 84.06 points or 0.40% to 21,207.99, KOSPI added 6.94 points or 0.26% to 2,676.60, Jakarta Composite advanced 26.67 points or 0.38% to 7,064.24 and Shanghai Composite was up by 23.67 points or 0.75% to 3,172.73. On the other hand, Nikkei 225 fell 7.41 points or 0.03% to 27,362.02 and Taiwan Weighted was down by 0.97 points or 0.01% to 16,609.65.