Post Session: Quick Review

Indian markets finally made a successful attempt to break in green on Thursday, when the global environment remained feeble and unsupportive. There was surge in the metal stocks on flash report of Chinese manufacturing surging to four months high that triggered buying in domestic markets, the Fed’s stimulus tapering too looked priced in and lots of short were covered. However, the continued weakness in rupee kept on putting pressure on the hard efforts of the marketmen.

The equity and money market gloom that had quadrupled in last session seemed aggravating further in early deals with minutes of US FOMC meeting indicating that Fed officials are broadly comfortable with Chairman Ben Bernanke’s plan to begin reducing the asset buying later this year, so long as the economy improves. There was some panic in the US markets, while the Asian markets too ended deeply in the red despite some intraday recovery after the report that the Chinese manufacturing unexpectedly expanded. However, it was the positive start of the European markets that provided the much needed support to the local bourses.

Back home, the first half of the trade remained quiet jittery with major benchmarks moving in-and-out of the green zone, the rupee slumping to fresh record low continued weighing on the sentiments, following the other emerging Asian currencies which fell on minutes of the Federal Reserve's last meeting on fears over capital outflows. Initially markets got a good bounce, as buying emerged at lower levels but it was equally countered by profit booking from the frenzied investors who feared more downtrend in the markets. The rupee made another record low of 65.65 per dollar, spooking the whole market sentiments and it looked another usual down day for the markets. However, there appeared a sudden spurt in the markets around noon with metal stocks taking the lead on positive cues from the China. Especially the steel stocks after the Steel Ministry opposed the move to lower export duty on iron ore to boost exports. Local steel companies too have raised concern on the issue, saying domestic demand exceeds production and a lowering of rates would lead to a rise in prices. Beaten down banking sector too witnessed good buying followed by oil & gas, PSU, technology and IT stocks, while the realty kept on sulking since the beginning. The broader markets too managed a recovery but they missed the glory which their major counterparts enjoyed for the day on back of value buying. Thankfully, the markets were able to keep their spirit high till end, making both the benchmarks ended firmly in green with triple digit gains after four straight days of gloom.

The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1281: 981, while 142 scrips remained unchanged. (Provisional)

The BSE Sensex gained 407.03 points or 2.27% to settle at 18312.94.The index touched a high and a low of 18349.82 and 17759.59 respectively.  The BSE Mid cap and Small cap indices ended higher by 0.69% and 0.54% respectively. (Provisional)

On the BSE Sectoral front, Metal up by 8.23%, Oil & Gas up by 3.57%, PSU up by 2.98%, Health Care up by 2.64% and IT up by 2.55% were the top gainers, while Realty down by 0.69% were the only losers in the space. (Provisional)

Out of the 30 stocks on the Sensex, 28 settled higher, while 2 stocks settled lower. The top gainers on the Sensex were Hindalco Industries up by 10.93%, Sterlite Industries up by 10.42%, Tata Steel up by 10.22%, ONGC up by 7.28% and Jindal Steel up by 4.89%. On the flip side, HDFC down by 1.01% and HDFC Bank down by 0.26% were the top losers on the Sensex. (Provisional)

Meanwhile, in order to raise the tax revenue collection, the government is likely to clear the Direct Taxes Code (DTC) Bill 2013, which will bring in sweeping changes in the income tax regime, including a higher 35% tax for the super-rich and a wealth tax on a host of new assets such as expensive watches and paintings.

As per the new tax bill, persons earning Rs 10 crore or more a year will be taxed at a higher rate of 35% on their income. Further, an additional tax of 10% may be levied if annual earnings from dividends on mutual funds and equities exceed Rs. 1 crore. For companies, minimum alternate tax may be levied on book profit, while, the securities transaction tax is likely to stay. At present, people with an annual income less than Rs. 2 lakh are exempt from paying taxes while those earning Rs 2-5 lakh are taxed at 10%, Rs 5-10 lakh at 20% and above Rs 10 lakh at 30%. These taxes slabs are also likely to be changed in the new law.

The government is struggling to keep in control the fiscal deficit of the country which surged to 4.9% of GDP in the FY13. The government has expressed its commitment to contain the fiscal deficit to 4.8 percent of GDP in FY14 and reduce it gradually to 3 percent by FY17 and devising various additional measures to garner more revenue. Tax income is the major source of revenue for the government. In the last fiscal, the government’s direct tax collection stood at around Rs 5.65 lakh crore, while, indirect taxes collection was at around Rs 4.69 lakh crore.

India VIX, a gauge for markets short term expectation of volatility gained 3.45% at 29.06 from its previous close of 28.11 on Wednesday. (Provisional)

The CNX Nifty gained 106.65 points or 2.01 % to settle at 5,409.20. The index touched high and low of 5,418.95 and 5,254.05 respectively. Out of the 50 stocks on the Nifty, 44 ended in the green, while 6 ended in the red.

The major gainers of the Nifty were Ranbaxy up 16.02%, Sesa Goa up by 13.09%, Hindalco Industries up by 11.04%, Reliance Infrastructure up by 10.15% and Tata Steel up by 10.01%. The key losers were DLF down by 4.06%, HDFC down by 1.45%, HDFC Bank down by 0.73%, Axis Bank down by 0.66% and ACC down by 0.63%.(Provisional)

Most of the European markets were trading in green with, France’s CAC 40 up by 1.02%, Germany’s DAX up by 1.06% and the United Kingdom’s FTSE 100 up by 0.84%.

All the Asian markets, barring Hang Seng concluded Thursday’s trade in red. Stocks however came off their lows, as a surprise improvement in Chinese manufacturing helped cheer investors after minutes of the Federal Reserve’s last meeting signaled the central bank was on course to pare bond purchases this year. China shares though surrendered, while Seoul shares slumped to their weakest close in six weeks as investors remained worried about capital outflows from Asian markets. Philippine stocks plunged as investors returned for the first time this week after severe floods and a public holiday kept the market closed through Wednesday. Hong Kong shares reversed early losses and ended higher, as investors covered recent shorts after positive European and China manufacturing surveys gave support to cyclical stocks.

China’s manufacturing activity is swinging out of contraction this month, according to the flash reading of the China manufacturing PMI, compiled by HSBC and Markit, rebounded to a four-month high of 50.1 from a final reading of 47.7 in July, an 11-month low. A reading below 50 indicates contraction in sector activity, while one above 50 shows growth. The flash PMI is typically based on 85% to 90% of the total responses to the survey, with the final reading due out at the beginning of next month. Besides, Business sentiment of Chinese small- and medium-sized enterprises weakened in the second quarter amid economic slowdown, as the SMEs’ confidence in operation, investment and financing conditions dropped. The overall quarterly measure of Chinese SMEs’ confidence retreated 4.47 percentage points to 52.04, after its surge in the first quarter. A reading above 50 means the SMEs feel confident about future conditions.

In Indonesia, the rupiah hit a four-year low yesterday to its weakest since April 2009, and forwards markets pointed to further declines for what is already the second-worst performing emerging market currency in Asia, on fears that the US Federal Reserve will soon begin to pare stimulus. Separately, President Susilo Bambang Yudhoyono stated that his administration would announce a policy package on Friday to deal with the slowing economy and volatility in the financial markets. The president acknowledged that the government is having difficulty reaching its target of 6.3% economic expansion this year.