Benchmarks trade flat-to-negative ahead of European summit

Indian equity markets have made a negative start amid weakness across Asian region ahead of the crucial European summit in Brussels. Doubts will surface if the summit leads to a permanent solution to the debt crisis that has plagued global markets for two years. Back home, participants booked their gains recorded in the previous session amid a subdued trend on other Asian bourses. Moreover, the government’s decision to suspend FDI in multi-brand retail also dampened the trading sentiment. Stocks like, Pantaloon Retail, Vishal Retail and Store One all edged lower by over two percent in the trade while, Metal stocks fell in the initial trade as LMEX, a gauge of six metals traded on the London Metal Exchange, dropped 0.63 percent on December 7, 2011. The broader indices too were struggling to get some traction while, the market breadth on the BSE was evenly divided; there were 715 shares on the gaining side against 711 shares on the losing side while 56 shares remained unchanged.

The BSE Sensex opened at 16,819.74; about 58 points lower compared to its previous closing of 16,877.06, and has touched a high and a low of 16,847.82 and 16,774.52 respectively.

The index is currently trading at 16,829.55, down by 47.51 points or 0.28%. There were 8 stocks advancing against just 22 declines on the index.

The overall market breadth has been evenly divided with 48.25% stocks advancing against 47.98% declines. The broader indices were trading marginally in the green; the BSE Mid cap and Small cap indices rose 0.07% and 0.02% respectively.

The top gaining sectoral indices on the BSE were, IT up by 0.26%, FMCG up by 0.12%, HC up by 0.05%, Auto up by 0.02% and TECk was up by 0.01%. While, CG down by 0.67%, Metal down by 0.55%, Oil and Gas down by 0.53%, Power down by 0.44% and Realty down by 0.42% were the top losers on the index.

The top gainers on the Sensex were Wipro up by 1.30%, Hero MotoCorp up by 1.25%, Bajaj Auto up by 0.72%, TCS up by 0.42% and Jindal Steel was up by 0.38%.

On the flip side, Coal India was down by 1.51%, Hindalco was down by 1.31%, Bharti Airtel was down by 1.06%, BHEL was down by 0.97% and Tata Motors was down by 0.89% were the top losers on the Sensex.

Meanwhile, Finance Minister Pranab Mukherjee has articulated hope that the Direct Taxes Code (DTC) will come into force from next financial year. The proposed DTC bill, seeks to modernize Indian tax system by replacing five decade old Income Tax Act, which was introduced in 1961. He said, ‘the proposed Direct Taxes Code brings together the policy initiatives on direct taxes. It is slated to come into force from the next financial year.’

On the issue of indirect tax reforms, Mukherjee said, ‘we are moving towards an economy-wide, generalised value-added tax system of Goods and Service Taxes (GST) at all levels in the country. The GST is a Value Added Tax (VAT), which is also going to be implemented from next financial year, will replace all indirect taxes levied on goods and services by central and state governments.

Referring to tax reforms within the country, Mukherjee said, the tax reforms are aimed at rationalization of tax rates, broadening of the tax base, special focus on sunrise areas like transfer pricing and international taxation, and strengthening of the tax information exchange network. The progressive personal income tax policy has resulted in a ten-fold increase in revenue collections, which went up from $8.62 billion in 1996-97 to $87 billion in 2010-11.

Finance minister also called for greater international cooperation to deal with the problem of tax evasion and black money. With reference to strategies adopted by the Indian government to deal with the issue of tax evasion and black money, he said, tax evasion undermines the intended benefits of a progressive tax policy. By adding further he said, ‘resolution of these issues requires international cooperation and alignment of tax systems for better cross-border compliance.’

On the global financial integrity report, minister said annual illicit outflows from emerging economies and developing countries average between $725 billion and $810 billion.

The S&P CNX Nifty opened at 5,037.40; about 25 points lower compared to its previous closing of 5,062.60, and has touched a high and a low of 5,049.05 and 5,027.60 respectively.

The index is currently trading at 5,044.10, lower by 18.50 points or 0.37%. There were 15 stocks advancing against 35 declines on the index.

The top gainers of the Nifty were PNB up by 1.74%, Hero MotoCorp up by 1.21%, Wipro up by 1.16%, Bajaj Auto up by 0.61% and TCS up by 0.49%.

On the flip side, RCom down by 1.43%, Hindalco down by 1.23%, BHEL down by 1.21%, Reliance Infra down by 1.19% and Siemens down by 1.17%, were the major losers on the index.

Most of the Asian equity indices were trading in the red; Hang Seng was down 128.94 points or 0.67% to 19,111.64, Jakarta Composite was down 20.84 points or 0.55% to 3,772.40, KLSE Composite was down 10.11 points or 0.68% to 1,472.88, Nikkei 225 was down 53.06 points or 0.61% to 8,669.11, Straits Times was down 44.08 points or 1.58% to 2,738.47, Seoul Composite was down 6.54 points or 0.34% to 1,912.88 and Taiwan Weighted was down by 87.43 points or 1.24% to 6,945.57.

On the flip side, Shanghai Composite was up by 9.69 points or 0.42% to 2,342.42.