Sensex reports first monthly loss in 2017

Market gears up to brace initial GST hiccups; investors maintain cautious stance

The stock market showed some strength in the first session of the new derivatives July series on Friday, with the Sensex and Nifty ending marginally higher, led by a rally in consumer and pharmaceutical stocks, while offsetting declines in sectors such as automobiles.
 
The benchmark indices still posted their first monthly loss this year. Following a 16 per cent rally in the first five months, the Sensex ended with a 0.7 per cent decline in June.
 
On Friday, the Sensex gained 64 points to close at 30,921.6, while the Nifty 50 index was up 0.18 per cent at 9,520.9. All broader indices, including the BSE Midcap index, ended with gains even as investors remained cautious ahead of the crucial switch to the goods and services tax (GST). For the week, the Sensex recorded a fall of 216.60 points, or 0.69 per cent, while the broader Nifty lost 54.05 points, or 0.56 per cent.
 
Tobacco-to-hotel maker ITC hogged the limelight while gaining 4 per cent to close at an all-time high of Rs 324. ITC’s stock gained as analysts said the implementation of the GST would have a neutral impact on earnings and would boost sales. FMCG, health care and consumer durables stocks helped the key indices to reverse losses to close in on the positive terrain. Sun Pharmaceutical Industries added 3 per cent and Cipla gained nearly 2 per cent.
 
On the other hand, the scrip of Hero MotoCorp declined more than 1 per cent, most among the Sensex components. Tata Motors fell 0.8 per cent, while M&M declined 0.6 per cent. Auto stocks fell on worries that the GST will increase prices and thus, hurt sales. The Nifty Auto index lost as much as 0.9 per cent and Tata Motors fell as much as 1.6 per cent.
 

The GST will kick in from the midnight of Friday, India’s biggest tax reform since Independence, unifying its $2-trillion economy and 1.3 billion people into a common market.
 
“There is some kind of profit-booking and sideways consolidation in the market, so most sectors are volatile,” said Siddharth Sedani, head and vice-president (equity advisory) at Anand Rathi.
 
“The nation is waiting for the rollout of the new tax regime with bated breath. Stock markets chose to trade with caution and hugged the flat line for most of the day. FMCG (fast-moving consumer goods) and healthcare stocks saw significant buying, while rate-sensitive stocks like banking, auto and financial services traded under pressure,” said Karthikraj Lakshmanan, senior fund manager (equities) at BNP Paribas Mutual Fund.
 
InterGlobe Aviation, parent of IndiGo, fell 6 per cent after it expressed interest in buying a stake in debt-laden Air India.Foreign investors bought shares worth Rs 160 crore on Friday, while domestic ones pumped in Rs 1,200 crore, according to provisional data. The Sensex now trades at 19 times its projected one-year forward earnings, much higher than its long-term average of 16 times.

With inputs from Agencies