Volatile session ends with small losses

Volatile trading session ended with small losses as investors analysed Union Budget proposals. The barometer index, the S&P BSE Sensex, fell 58.36 points or 0.16% to 35,906.66, as per the provisional closing data. The Nifty 50 index fell 10.80 points or 0.10% to 11,016.90, as per the provisional closing data.

The Sensex settled a tad below psychological 36,000 mark after moving above and below that level in afternoon trade. The Nifty settled above 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 General Budget 2018-19 in Parliament today 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%.

 

IMF, in its latest update, has forecast that India will grow at 7.4% next year in the backdrop of services resuming high growth rates of 8% plus, exports expected to grow at 15% in 2017-18 and manufacturing back on good growth path.

Jaitley levied 10% tax on Long Term Capital Gains exceeding Rs 1 lakh, without allowing any indexation benefit. However, all gains up to 31st 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. He proposed to increase customs duty on mobile phones from 15% to 20%, on some of their parts and accessories to 15% and on certain parts of TVs to 15%.

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%.

Outlay on health, education and social protection will be Rs 1.38 lakh crore. To boost agriculture sector, minimum support price (MSP) for all unannounced kharif crops will be one and half times of their production cost like majority of rabi crops: Institutional Farm Credit raised to Rs 11 lakh crore in 2018-19 from Rs 8.5 lakh crore in 2014-15. 'Operation Greens' launched to address price fluctuations in potato, tomato and onion for benefit of farmers and consumers

The Budget proposals also seek to provide relief to salaried tax payers by allowing a standard deduction of Rs 40,000 in place of the present exemption allowed for transport allowance and reimbursement of miscellaneous medical expenses. To control cash economy, payments exceeding Rs. 10,000 in cash made by trusts and institutions to be disallowed and would be subject to tax.

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 Sensex rose 291.81 points, or 0.81% at the day's high of 36,256.83 in afternoon trade, its highest level since 30 January 2018. The index fell 463.28 points, or 1.29% at the day's low of 35,501.74 in afternoon trade, its lowest level since 19 January 2018. The Nifty rose 89.65 points, or 0.81% at the day's high of 11,117.35 in morning trade, its highest level since 30 January 2018. The index fell 148.90 points, or 1.35% at the day's low of 10,878.80 in afternoon trade, its lowest level since 19 January 2018.

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, 1,448 shares fell and 1,327 shares rose. A total of 148 shares were unchanged.

The total turnover on BSE amounted to Rs 5779.23 crore, lower than turnover of Rs 5947.43 crore registered during the previous trading session.

Car major Maruti Suzuki India fell 1.36%. The company said its total vehicle sales rose 4.8% to 1.51 lakh units in January 2018 over January 2017. While domestic sales grew 5%, exports saw a 2.8% growth compared to the corresponding period last year. The announcement was made during trading hours today, 1 February 2018.

Auto major Mahindra & Mahindra (M&M) rose 4.81%. The company said its total auto sales rose 32% to 52,048 lakh units in January 2018 over January 2017. While domestic sales grew 33%, exports saw a 15% growth compared to the corresponding period last year. The announcement was made during trading hours today, 1 February 2018.

Shares of eight defence firms rose after the finance minister said that government will bring out an industry friendly Defence Production Policy 2018 to promote domestic defence production. Bharat Forge (up 1.5%), Centum Electronics (up 0.53%), L&T (up 2.49%), Punj Lloyd (up 1.31%), BEML (up 0.76%), Taneja Aerospace & Aviation (up 3.92%), Tata Power Company (up 1.35%) and Walchandnagar Industries (up 0.14%) edged higher. Bharat Electronics (down 3.39%), Reliance Naval Engineering (down 2.28%) and Astra Microwave Products (down 1.05%), edged lower.

Jaitely said that a lot of emphasis has been given to modernizing and enhancing the operational capability of the defence forces over the last three and a half years. The Finance Minister appreciated the stellar role played by the armed forces in meeting the challenges on the country's borders as well as in managing the internal security environment both in Jammu and Kashmir and the North East.

Arun Jaitely said that private investment in defence production has been opened up including liberalizing foreign direct investment. The government will take measures to develop two defence industrial production corridors in the country. The government will also bring out an industry friendly Defence Production Policy 2018 to promote domestic production by public sector, private sector and micro, small and medium enterprises (MSMEs), he said.

Realty stocks traded 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 4.85%), D B Realty (up 2.96%), Brigade Enterprises (up 2.26%), Godrej Properties (up 2.18%) and Prestige Estates Projects (up 0.28%) gained. Indiabulls Real Estate (down 2.38%), Oberoi Realty (down 1.84%), Unitech (down 1.78%), DLF (down 1.64%), HDIL (down 1.3%) and Sobha (down 0.23%) 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 five cement companies rose on hopes of increase in demand for cement on higher allocation for infrastructure in the budget 2018-19. ACC (up 0.61%), Shree Cement (up 1.09%), Ambuja Cements (up 1.84%), and UltraTech Cement (up 0.36%) gained.

Grasim Industries advanced 2.62%. 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.

Finance Ministry will leverage the India Infrastructure Finance Corporation (IIFCL) to help finance major infrastructure projects, including investments in educational and health infrastructure, on strategic and larger societal benefit considerations.

Textile stocks dropped as the sector did not seem pleased with finance minister Arun Jaitley's quantum of fund allocation to the textile sector as announced in the Union Budget speech 2018-19. Raymond (down 3.09%), Bombay Dyeing & Manufacturing Company (down 2.52%), Arvind (down 1.32%), Kitex Garments (down 1.13%) and Welspun India (down 0.43%) declined. Indo Rama Synthetics (India) (up 0.71%) gained.

The Government had approved a comprehensive textile sector package of Rs 6000 crore in 2016 to boost the apparel and made-up segments. The government, now proposed to provide an outlay of Rs 7148 crore for the textile sector in FY 2019.

On the economic front, the Nikkei India Manufacturing Purchasing Managers' Index, or PMI, fell to 52.4 in January, 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.

Meanwhile, private-sector employment was strong in January, as employers added 234,000 jobs, Automatic Data Processing Inc. reported Wednesday.

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