Benchmarks manage to end marginally in green amid volatility

Indian equity benchmarks managed to end Wednesday’s session marginally in green after swinging between gains and losses ahead of the weekly F&O expiry. Investors kept a close eye on the Ukraine-Russia war situation with Poland reportedly being hit by Russian missiles. Markets made negative start, as traders got concerned with data released by the commerce ministry showing that India's merchandise trade deficit widened to $26.91 billion in October as exports crashed by 17 percent year-on-year to $29.78 billion while imports rose by 6 percent. The trade deficit stood at $17.91 billion in October 2021. Some pessimism also came in as foreign institutional investors (FIIs) have net offloaded shares worth Rs 221.32 crore on Tuesday, according to the provisional data available on the NSE. But, key indices soon reversed losses and traded in green in afternoon deals, taking support from the Central Board of Direct Taxes (CBDT) chairman Nitin Gupta’s statement that direct tax collections are likely to be 25-30% more than the budget estimate (BE) of Rs 14.2 trillion for the current fiscal.

Markets wiped out all their gains and once again fell into red terrain in late afternoon session amid volatility. Traders also remained cautious as global ratings agency Moody's Investors Service has given a 'negative outlook' to credit worthiness of countries globally including India, for 2023, saying high prices of food and energy would curb economic growth and raise social tensions. It said tighter financial conditions and economic scarring will push some debt burdens to unsustainable levels, while rising borrowing costs will erode debt affordability. But selective buying in late trades helped key indices to end in positive territory. Traders also took a note of reports that States got some reprieve in their debt cost with the weighted average price falling by 12 bps to 7.67 per cent due to receding appetite from issuers as they received tax payouts from the Centre last week.

On the global front, European markets were trading mostly in red as investors took stock of rising geopolitical risks and awaited U.K. budget announcement on Thursday. Asian markets ended mostly lower on Wednesday as investors waited for more clarity over reports Russian missiles aimed at Ukraine have hit NATO territory in Poland. If the missile that hit Poland was fired by Russia, it would mark the first time in the war that Russian weapons have come down on a member of the North Atlantic Treaty Organization (NATO). Regional losses were somewhat tempered by an easing of inflation and interest-rate concerns after data showed U.S. producer inflation hit a 14-month low in October.

Back home, mineral industry stocks were in focus as the mines ministry's report showed that the nation's mineral production increased by 4.6 per cent in September compared to the same month last year. Stocks related to steel industry were in watch as ICRA in its report said after a challenging September quarter, the profitability of domestic steel makers in the October-December quarter is expected to improve on back of increased demand and lower input costs.

Finally, the BSE Sensex rose 107.73 points or 0.17% to 61,980.72 and the CNX Nifty was up by 6.25 points or 0.03% to 18,409.65.

The BSE Sensex touched high and low of 62,052.57 and 61,708.63, respectively. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.66%, while Small cap index was down by 0.34%.

The top gaining sectoral indices on the BSE were Bankex up by 0.47%, Industrials up by 0.37%, Capital Goods up by 0.36%, TECK up by 0.30% and IT up by 0.20%, while Metal down by 1.49%, Utilities down by 1.40%, Power down by 1.27%, Realty down by 1.03% and Oil & Gas down by 0.76% were the top losing indices on BSE.

The top gainers on the Sensex were Kotak Mahindra Bank up by 2.73%, Hindustan Unilever up by 0.98%, Dr. Reddy's Lab up by 0.92%, HDFC Bank up by 0.80% and Bharti Airtel up by 0.77%. On the flip side, Bajaj Finance down by 1.89%, Tata Steel down by 1.80%, NTPC down by 1.19%, Bajaj Finserv down by 1.15% and Ultratech Cement down by 0.73% were the top losers.

Meanwhile, expressing optimism over tax collection, Central Board of Direct Taxes (CBDT) Chairman Nitin Gupta has said that the direct tax collection in the current fiscal is likely to exceed the budget target of Rs 14.20 lakh crore by about 30 per cent. He also said that the Budget for next fiscal could bring about some tweaks in the TDS provision for online gaming to check tax evasion.

He said ‘Currently there is a provision for deduction of TDS on online gaming. There is existing provision, if it needs to be modified or retained in the same way that needs to be seen’. Currently, a 10 per cent Tax Deduction at Source (TDS) is levied on income from online gaming. He further said that given the current buoyancy in collections, the Budget target for the next fiscal (2023-24) is also likely to be higher.

He further said a 25-30 per cent growth in tax collection would take the net direct tax mop-up for current fiscal at Rs 17.75-Rs 18.46 lakh crore. The gross direct tax collections between April 1-November 10 stood at Rs 10.54 lakh crore, registering a growth of 31 per cent. Net collections, after adjusting refunds, stood at Rs 8.71 lakh crore, which is 61.31 per cent of the Budget estimates (BE) for the full year tax collection target.

The Chairman also said that with online gaming coming in limelight, the tax department is working to see how a better audit trail can be established for money spent and earned from such online activities. He added ‘Online gaming and betting is a new kid on the block and new will take a view at the stage of budget preparation and see how evasion can be controlled, and at the same time making it easy for taxpayer to maintain accounts and pay taxes’. He said the department is creating audit trail and presenting transaction information to the taxpayers.

The CNX Nifty traded in a range of 18,442.15 and 18,344.15. There were 21 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Kotak Mahindra Bank up by 2.68%, Coal India up by 1.34%, HDFC Bank up by 0.92%, Hindustan Unilever up by 0.92% and TCS down by 0.82%. On the flip side, Apollo Hospital down by 2.56%, Adani Ports & SEZ down by 2.35%, Hindalco down by 2.34%, Bajaj Finance down by 2.15% and Adani Enterprises down by 2.04% were the top losers.

European markets were trading mostly in red; France’s CAC decreased 8.85 points or 0.13% to 6,632.81 and Germany’s DAX decreased 67.70 points or 0.47% to 14,310.81, while UK’s FTSE 100 increased 14.08 points or 0.19% to 7,383.52.

Asian markets ended mostly lower on Wednesday amid increased geopolitical tensions following news of a Russian-made missile strike in Poland, even as US President Joe Biden said he doesn't believe a missile strike that killed two people in Poland was fired from Russia. Chinese shares dropped on growth concerns after data showed house prices in China marked their worst fall in seven years in October. Moreover, Hong Kong shares declined on profit-booking after recent strong gains on optimism over the scaling back of covid restrictions and new initiatives to support the property sector. Although, Japanese shares gained slightly tracking Wall Street gains overnight as Fed Vice Chair Lael Brainard's comments and weak producer price inflation data added to expectations of smaller Fed rate hikes.