Benchmarks trade higher in early deals; Axis Bank, SBI lead gainers

Indian equity markets made positive start on Thursday amid mixed global cues and ahead of the monthly expiry of derivative contracts. Benchmarks are trading in green with notable gains of around half a percent each in early deals. Buying in Power, Bankex and Utilities aided the sentiments. Some support came in with Finance Minister Nirmala Sitharaman’s statement that any increase in GST rates under the rate rationalisation exercise is intended to make up for the ‘inefficiencies’ in the value chain. However, upside remained capped with a private report that inflationary pressures are likely to continue and force the RBI to further hike interest rates during the course of the current fiscal but the tighter financial conditions can impact growth. The report said there are reasons to be optimistic on the growth front but factors like tighter financial conditions can have an impact on the GDP expansion. Meanwhile, the Securities and Exchange Board of India's (Sebi's) board allowed foreign portfolio investors (FPIs) to trade in exchange-traded commodity derivatives. The move, it said, will enhance liquidity and market depth, as well as promote efficient price discovery.

On the global front, Asian markets are trading mixed following the mixed cues overnight from Wall Street, as uncertainty about the near-term outlook for the markets kept traders on the sidelines following recent volatility and global recession concerns. Traders also digested comments coming out from the European Central Bank's forum in Sintra. Back home, oil & gas sector stocks were in focus as the Union Cabinet decided to give marketing freedom to domestic crude oil producers, allowing them to sell petroleum to any company in the local market.

The BSE Sensex is currently trading at 53327.16, up by 300.19 points or 0.57% after trading in a range of 52897.16 and 53377.54. There were 23 stocks advancing against 6 stocks declining, while 1 stock remain unchanged on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.28%, while Small cap index was up by 0.44%.

The top gaining sectoral indices on the BSE were Power up by 1.21%, Bankex up by 1.12%, Utilities up by 1.09%, Telecom up by 0.79%, PSU up by 0.57%, while Realty down by 0.19% and Metal down by 0.05% were the only losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 1.95%, SBI up by 1.95%, Kotak Mahindra Bank up by 1.14%, ICICI Bank up by 1.02% and Tata Steel up by 0.98%. On the flip side, Bharti Airtel down by 0.40%, Titan Company down by 0.12%, Ultratech Cement down by 0.08%, Nestle down by 0.06% and ITC down by 0.05% were the top losers.

Meanwhile, Finance Minister Nirmala Sitharaman has said any increase in Goods and Services Tax (GST) rates under the rate rationalisation exercise is intended to make up for the ‘inefficiencies’ in the value chain. Stating that all states are aware of the potential impact of rate rationalisation on inflation, she said any increase in tax rates will also make up for the tax burden, which is being borne by some other activities in that value chain. She said ‘Technology may correct anomalies for inefficiencies and therefore may have a possible impact on revenue collection. But the revenue-neutral rate of the RBI study has been breached to the disadvantage of the system… That calls for a correction…’.

Sitharaman said huge refunds are being given out due to duty inversion in certain cases and that needs to be corrected. She said ‘As a result of which again you are sitting over potential tax yielding points, which have been left out. That’s not the efficiency of the system. So, rate rationalisation, if it results in an increase, is also making up for…the kind of inefficiencies, which have appeared now or the collateral which is being borne by some other activities in that value chain’. So, she said rate rationalisation is something the Group of ministers (GoM) is looking at from this point of view also. Inefficiencies in the taxation system creep in when inputs and final products are taxed at varying rates, leading to either tax evasion or business entities not being able to fully utilise the input tax credit fully.

The GST Council, chaired by Union Finance Minister and comprising state finance ministers, in the 47th meeting approved the interim report of the GoM on rate rationalisation, headed by Karnataka Chief Minister Basavaraj Bommai. The council also gave a 3-month extension to the panel for submitting a full report on rate rationalisation and potential tax slab merger under the GST. The panel in its interim report has suggested removing the GST exemption on a host of items and also correcting duty inversion in some cases. The changes will be implemented from July 18. So, pre-packed and labelled meat, except frozen, fish, curd, paneer, honey, dried leguminous vegetables, dried makhana, wheat and other cereals, wheat or meslin flour, jaggery, puffed rice (muri), all goods and organic manure and coir pith compost will not be exempted from GST and will attract a 5% tax from July 18. Similarly, 18 per cent GST will be levied on the fee charged by banks for the issue of cheques (lose or in book form). Maps and charts, including atlases, will attract a 12 per cent levy, while goods that are unpacked, unlabelled and unbranded will continue to remain exempted from the GST.

Besides, 12 per cent tax on hotel rooms below Rs 1,000/day will be levied against tax exemption currently. Also, inverted duty for a host of items, including edible oil, coal, LED lamps, printing/drawing ink, finished leather and solar water heater too would be corrected. The council also approved the report of the fitment committee, comprising officers of central and state governments, to tweak tax rates in some items. Tax rates for orthopaedic implants (Trauma, Spine, and Arthroplasty Implants in body); Orthoses (Splints, braces, belts & callipers); Prostheses (artificial limbs) will be cut to a uniform five per cent, from the current differential rate of 12 and 5 per cent. The Committee also recommended a reduction in the GST on ropeway travel from 18 per cent to 5 per cent and on Ostomy Appliances from 12 per cent to 5 per cent. The GST on tetra pack too would be hiked to 18 per cent from 12 per cent at present.

The CNX Nifty is currently trading at 15874.90, up by 75.80 points or 0.48% after trading in a range of 15769.95 and 15890.00. There were 35 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 1.96%, SBI up by 1.90%, Apollo Hospital up by 1.40%, Kotak Mahindra Bank up by 1.27% and HDFC Life Insurance up by 1.22%. On the flip side, Bajaj Auto down by 3.17%, Cipla down by 1.80%, Tata Consumer Products down by 0.95%, Coal India down by 0.79% and Shree Cement down by 0.73% were the top losers.

Asian markets are trading mixed; Nikkei 225 slipped 391.45 points or 1.46% to 26,413.15, Straits Times fell 10.34 points or 0.33% to 3,124.53, Taiwan Weighted declined 384.21 points or 2.52% to 14,855.92 and KOSPI lost 24.94 points or 1.05% to 2,353.05. On the other hand, Hang Seng rose 19.43 points or 0.09% to 22,016.32, Jakarta Composite added 15.11 points or 0.22% to 6,957.46 and Shanghai Composite was up by 44.12 points or 1.31% to 3,405.64.