Market drifts lower in choppy trade as government introduces LTCG tax

Key benchmark indices drifted lower after the finance minister Arun Jaitley announced long-term capital gains (LTCG) tax for investing in equities. The barometer index, the S&P BSE Sensex, fell 58.36 points or 0.16% to settle at 35,906.66. The Nifty 50 index fell 10.80 points or 0.10% to settle at 11,016.90. Intraday volatility was intense.

Both the Sensex and the Nifty hit over one-week closing low. The Sensex settled below psychological 36,000 mark after moving above and below that level in afternoon trade. But the Nifty maintained the psychological 11,000 mark after gyrating above and below that level in afternoon trade.

 

The Union Minister for Finance and Corporate Affairs Arun Jaitley while presenting the Union Budget 2018-19 in Parliament today, 1 February 2018 said that the government is firmly on course to achieve high growth of 8% plus as manufacturing, services and exports are back on good growth path. While GDP growth at 6.3% in the second quarter of 2017-18 signalled turnaround of the economy, growth in the second half is likely to remain between 7.2% to 7.5%.

Jaitley levied 10% tax on Long Term Capital Gains (LTCG) exceeding Rs 1 lakh, without allowing any indexation benefit. However, all gains up to 31 January 2018 will be grandfathered. Proposed to introduce tax on distributed income by equity oriented mutual funds at the rate of 10%. Proposed to increase cess on personal income tax and corporation tax to 4% from present 3%.

Jaitley proposed a reduced rate of 25% to companies that have reported turnover up to Rs 250 crores in financial year 2016-17.

The Finance Minister announced that 2017-18 disinvestment target of Rs 72,500 crore has been exceeded and expected receipts of Rs 1,00,000 crore. He set disinvestment target of Rs 80,000 crore for 2018-19. The Budget Revised Estimates for expenditure in 2017-18 are Rs 21.57 lakh crore (net of GST compensation transfers to the States) as against the Budget Estimates of Rs 21.47 lakh crore.

The Finance Minister projected a Fiscal Deficit of 3.3% of GDP for the year 2018-19. The Revised Fiscal Deficit estimates for 2017-18 were put at Rs 5.95 lakh crore at 3.5% of GDP. He also proposed acceptance of key recommendations of the Fiscal Reform and Budget Management Committee to bring down Central Government's Debt to GDP ratio to 40%.

Coming back to equity market, trading was highly volatile. After a decent opening, key benchmark indices slumped to almost two-weeks low in afternoon trade. Shares bounced back from the day's low as bargain hunting emerged.

The barometer index, the S&P BSE Sensex, fell 58.36 points or 0.16% to settle at 35,906.66, its lowest closing level since 22 January 2018. The Sensex rose 291.81 points, or 0.81% at the day's high of 36,256.83 in afternoon trade. The index fell 463.28 points, or 1.29% at the day's low of 35,501.74 in afternoon trade.

The Nifty 50 index fell 10.80 points or 0.10% to settle at 11,016.90, its lowest closing level since 22 January 2018. The Nifty rose 89.65 points, or 0.81% at the day's high of 11,117.35 in morning trade. The index fell 148.90 points, or 1.35% at the day's low of 10,878.80 in afternoon trade.

Among secondary barometers, the BSE Mid-Cap index fell 0.54%, underperforming the Sensex. The BSE Small-Cap index ended flat, outperforming the Sensex.

The market breadth, indicating the overall health of the market, was negative. On BSE, 1,463 shares fell and 1,311 shares rose. A total of 149 shares were unchanged.

The total turnover on BSE amounted to Rs 5826.73 crore, lower than turnover of Rs 5947.43 crore registered during the previous trading session.

Among the sectoral indices on BSE, the S&P BSE Oil & Gas index (down 1.28%), the S&P BSE Consumer Durables index (down 1.78%), and the S&P BSE Bankex index (down 0.64%) underperformed the Sensex. The S&P BSE Power index (up 0.05%), the S&P BSE Metal index (up 0.25%) and the S&P BSE Capital Goods index (up 1.57%) outperformed the Sensex.

Shares of the country's largest cigarette maker ITC rose 1.51% to Rs 275.35 after the government left the cess on cigarettes unchanged.

Car major Maruti Suzuki India fell 1.17%. The company said its total vehicle sales rose 4.8% to 1.51 lakh units in January 2018 over January 2017. Domestic sales grew 5% to 1.40 lakh units while exports rose 2.8% to 10,751 units in January 2018 over January 2017. The announcement was made during trading hours today, 1 February 2018.

Auto major Mahindra & Mahindra (M&M) rose 4.44% after the company said its total auto sales rose 32% to 52,048 units in January 2018 over January 2017. Domestic sales rose 33% to 49,432 units while exports rose 15% to 2,616 units in January 2018 over January 2017. The announcement was made during trading hours today, 1 February 2018.

Seperately, M&M reported that total tractor sales rose 38% to 15,909 units in January 2018 over January 2017. Domestic tractor sales rose 40% to 14,776 units in January 2018 over January 2017. Exports rose 8% to 1,133 units in January 2018 over January 2017.

Tata Motors fell 1.15%. Tata Motors commercial and passenger vehicles domestic sales rose 43% to 59,441 units in January 2018 over in January 2017. The construction, manufacturing and logistics sectors aided in an increased demand across commercial vehicles segment during the month. The company's commercial vehicles sales from exports rose 5% to 4,900 units in January 2018 over January 2017. The announcement was made during trading hours today, 1 February 2018.

Engineering and construction major L&T advanced 2.77% after consolidated net profit surged 48.4% to Rs 1617.88 crore on 10.1% growth in net sales to Rs 28747.45 crore in Q3 December 2017 over Q3 December 2016. The result was announced after market hours yesterday, 31 January 2018.

The company won fresh orders worth Rs 48130 crore at the group level during Q3 December 2017, registering a growth of 38%, with strong ordering activity witnessed during the quarter. Consolidated order book of the group stood at Rs 270727 crore as on 31 December 2017, higher by 4.7% on a y-o-y basis. The international order book constituted 25% of the total order book.

L&T said that the board of directors of the company has approved subscription to the equity shares offered by L&T Finance Holdings (LTFH) on a preferential basis up to an amount not exceeding Rs 2000 crore, subject to necessary approvals, including the approval of board of directors and shareholders of LTFH. The exact amount of the subscription would depend on the preferential issue that LTFH would be making to the company, L&T said.

ICICI Bank fell 2.04% after the bank reported 32.42% slide in net profit to Rs 1650.24 crore on 4.12% fall in total income to Rs 16832.22 crore in Q3 December 2017 over Q3 December 2016. The result was announced after market hours yesterday, 31 January 2018.

ICICI Bank was up 0.17% after the bank reported 32.4% slide in net profit to Rs 1650.24 crore on 4.1% fall in total income to Rs 16832.22 crore in Q3 December 2017 over Q3 December 2016. The result was announced after market hours yesterday, 31 January 2018.

ICICI Bank's gross non-performing customer assets (NPAs) net of write offs stood at Rs 46038.70 crore as on 31 December 2017 as against Rs 44488.54 crore as on 30 September 2017 and Rs 38084.97 crore as on 31 December 2016. The ratio of gross non performing customer assets (net of write-offs) to gross customer assets stood at 7.82% as on 31 December 2017 as against 7.87% as on 30 September 2017 and 7.2% as on 31 December 2016.

The ratio of net non performing customer assets to net customer assets stood at 4.2% as on 31 December 2017 as against 4.43% as on 30 September 2017 and 3.96% as on 31 December 2016. The bank's provisions and contingencies rose 31.59% to Rs 3569.56 crore in Q3 December 2017 over Q3 December 2016.

NTPC slipped 0.73% after the company reported 4.4% fall in net profit to Rs 2360.81 crore on 7.1% rise in net sales to Rs 20774.37 crore in Q3 December 2017 over Q3 December 2016. The result was announced after market hours yesterday, 31 January 2018.

Vedanta rose 0.47%. The company's consolidated net profit declined 8.62% to Rs 2959.00 crore on 25.48% rise in net sales to Rs 24361.00 crore in Q3 December 2017 over Q3 December 2016. The result was announced after market hours yesterday, 31 January 2018.

Realty stocks were mixed after the finance minister Arun Jaitley said that the government will establish a dedicated Affordable Housing Fund in National Housing Bank. Puravankara Projects (up 4.25%), D B Realty (up 1.81%), Godrej Properties (up 1.53%) and Prestige Estates Projects (up 1.64%) gained. Indiabulls Real Estate (down 3.26%), Oberoi Realty (down 0.49%), Unitech (down 2.01%), DLF (down 2.18%), HDIL (down 2.16%) and Sobha (down 1.1%) declined.

The government will establish a dedicated Affordable Housing Fund (AHF) in National Housing Bank, funded from priority sector lending shortfall and fully serviced bonds authorized by the Government of India.

The government has a fixed a target that every poor of this country may have his own house by 2022. For this purpose Prime Minister Awas Yojana has been launched in rural and urban areas of the country. Under Prime Minister Awas Scheme Rural, 51 lakh houses in year 2017-18 and 51 lakh houses during 2018-19 which is more than one crore houses will be constructed exclusively in rural areas, Jaitley said. In urban areas the assistance has been sanctioned to construct 37 lakh houses.

Shares of cement companies rose on hopes of increase in demand for cement on higher allocation for infrastructure in the budget 2018-19. ACC (up 0.87%), Shree Cement (up 1.26%), Ambuja Cements (up 1.46%), and UltraTech Cement (up 0.12%) gained.

Grasim Industries advanced 2.43%. Grasim has exposure to the cement sector through its holding in UltraTech Cement.

The focus of the government next year will be on providing maximum livelihood opportunities in the rural areas by spending more on livelihood, agriculture and allied activities and construction of rural infrastructure. In the year 2018-19, for creation of livelihood and infrastructure in rural areas, total amount to be spent by the ministries will be Rs 14.34 lakh crore, including extra-budgetary and non-budgetary resources of Rs 11.98 lakh crore.

Infrastructure is the growth driver of economy. The country needs massive investments estimated to be in excess of Rs 50 lakh crore in infrastructure to increase growth of GDP, connect and integrate the nation with a network of roads, airports, railways, ports and inland waterways and to provide good quality services to people, Jaitley added.

The government has made an all-time high allocation to rail and road sectors. The government is committed to further enhance public investment. Provision of key linkages like coal for power, power for railways and railway rakes for coal have been rationalized and made very efficient.

In order to create employment and aid growth, Government's estimated budgetary and extra budgetary expenditure on infrastructure for 2018-19 is being increased to Rs 5.97 lakh crore against estimated expenditure of Rs 4.94 lakh crore in 2017-18.

Shares of two food processing companies rose after the finance minister Arun Jaitley in the budget 2018-19 doubled allocation towards the sector. Avanti Feeds (up 7.95%) and Apex Frozen Foods (up 5%) gained.

Finance minister said that food processing sector is growing at 8% per annum and the allocation for the sector has been doubled to Rs 1400 crore in 2018-2019. Finance Minister proposed to extend Kisan credit card to fisheries & animal husbandry farmers.

On the economic front, the Nikkei India Manufacturing Purchasing Managers' Index, or PMI, fell to 52.4 in January 2018, reflecting a slower growth after the index reached a 5-year high at 54.7 in December 2017. A reading above 50 indicates economic expansion, while a reading below 50 points toward contraction.

Overseas, most European shares were trading higher as investors reacted to a slew of corporate earnings. Asian shares settled on a mixed note.

US stocks closed slightly higher in the last session. The US Federal Reserve announced it was holding rates steady, a move that was widely expected. The Federal Open Market Committee (FOMC) also said it expected inflation pressure to pick up as the year progressed.

Powered by Capital Market - Live News