Benchmarks finally gets sigh of relief; Nifty reclaims 5,400 mark

Snapping four days downfall, Indian equity benchmarks finally got sigh of relief with frontline gauges recapturing crucial 5,400 (Nifty) and 18,300 bastions, gaining over two percentage points as firm European markets coupled with upbeat reading on Chinese manufacturing data aided to the positive sentiment. Earlier, markets witnessed extreme volatility with major benchmarks moving between green and red terrain in the first half as rupee slumped to fresh record low of 65.56 per dollar mark, dampening investors’ confidence. Sentiments mainly remained jittery after minutes from the Federal Reserve’s July policy meeting showed it was on track to start tapering stimulus as early as next month, sending Treasury yields to two-year highs. But, market started gaining strength in second half of the trade and entered into the green terrain as market-men opted to go for beaten down but fundamentally strong stocks.

Firm opening in European markets too aided the sentiments with CAC, DAX and FTSE all trading with a gain of over half a percent in early deals, boosted by decent corporate results and PMI data. Sentiments also got some support with Chinese vast manufacturing sector hitting four-month high in August as new orders rebounded, reinforcing signs of stabilization in the world’s second-largest economy. However, all the Asian equity indices shut shop in the red with Malaysia’s benchmark KLSE Composite declining the most, as the nation’s current account surplus plunged in the second quarter on weakening exports, overshadowing a slight acceleration in economic growth.

Back home, market continued to trade with traction in the last leg of trade as Indian rupee trimmed losses after hitting record low below 65 against the dollar. The rupee was hovering at near 64.85 at the time of closing of equity markets. There was some buzz from report that 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. Meanwhile, foreign direct investment (FDI) into India increased by about 16 percent year-on-year to $1.44 billion in June 2013, compared to $1.24 billion, though the numbers still are the lowest figure during the calendar year.

Sentiments also remained up-beat after metal and mining stocks edged higher on a report showing that China’s manufacturing unexpectedly expanded in August. Steel shares were also in demand on reports that steel major JSW Steel will hike product prices by 4% to 6% from 1 September 2013, following a steep rise in raw material cost. Buying in software related stocks like Hexaware Technologies, Infosys, Wipro, MphasiS, Tech Mahindra and HCL Technologies too boosted the sentiments after rupee depreciated to over 65 per dollar mark.

The NSE’s 50-share broadly followed index Nifty rose by over one hundred points to end comfortably above its psychological 5,400 level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged over four hundred points to reclaim the psychological 18,300 mark.

Moreover, broader markets too ended the session in the green with a gain of over half a percent. The market breadth remained in favour of advances, as there were 1,280 shares on the gaining side against 985 shares on the losing side, while 135 shares remained unchanged.

Finally, the BSE Sensex surged 407.03 points or 2.27% to settle at 18,312.94, while the CNX Nifty climbed by 105.90 points or 2.00% to end at 5,408.45.

The BSE Sensex touched a high and a low of 18,349.82 and 17,759.59, respectively. The BSE Mid cap index was up by 0.69% and Small cap index was up by 0.54%.

The top gainers on the Sensex were, Hindalco up by 10.93%, Sterlite Industries up by 10.42%, Tata Steel up 10.22%, ONGC up 7.28% and Bharti Airtel up 4.97%. On the flip side, HDFC down by 1.01% and HDFC Bank was down by 0.26% were the top losers on the index. 

The top gainers on the BSE sectoral space were, Metal up 8.23%, Oil & Gas up 3.57%, PSU up 2.98%, Health Care up 2.64% and IT up 2.55%, while Realty down by 0.69% was the only loser on the sectoral space.

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.

The CNX Nifty touched a high and low of 5,418.95 and 5,254.05 respectively. 

The top gainers on the Nifty were Ranbaxy up 16.02%, Sesa Goa up by 13.09%, Hindalco up 11.04%, Reliance Infra up 10.15% and Tata Steel up by 10.01%. On the flip side, the top losers of the index 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%.

The European markets were trading in green, France’s CAC 40 up by 1.00%, Germany’s DAX up by 1.03% and the United Kingdom’s FTSE 100 up by 0.76%.

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.