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Budget News

  • Broader selloff drags Nifty below 11,450 mark
  • July 19,2019  17:20
  • Key equity benchmarks ended steeply lower amid broad-based selling pressure. The Nifty closed below 11,450 level for the first time since 17 May 2019. The market opened higher and hit fresh intraday high in early trade amid positive global cues. The barometers reversed trend and descended into negative in morning trade due to steep selling pressure. Domestic shares came under bear clutch as the government did not offer any respite to foreign investors registered as trusts from the proposed super-rich tax.

    The Nifty slipped below its 100-day moving average (DMA) placed at 11,567. The other key level to watch for the Nifty is 11,125, which is 200-DMA.

    The Sensex fell 560.45 points or 1.44% to settle at 38,337.01, its lowest closing level since 17 May 2019. The index rose 161.27 points, or 0.41% at the day's high of 39,058.73. The index fell 626.11 points, or 1.61% at the day's low of 38,271.35.

    The Nifty 50 index fell 177.65 points or 1.53% to settle at 11,419.25, its lowest closing level since 17 May 2019. The index rose 43.45 points, or 0.37% at the day's high of 11,640.35. The index fell 197.60 points, or 1.70% at the day's low of 11,399.30.

    The S&P BSE Mid-Cap index fell 1.99%. The S&P BSE Small-Cap index fell 1.83%. Both these indices underperformed the Sensex.

    The market breadth was tilted in favour of sellers. On the BSE, 664 shares rose and 1877 shares fell. A total of 130 shares were unchanged.

    Among the sectoral indices on the BSE, the S&P BSE Power index (up 0.36%), the S&P BSE Consumer Durables index (up 0.22%) and the S&P BSE Utilities index (down 0.01%) outperformed the S&P BSE Sensex. Meanwhile, the S&P BSE Auto index (down 3.24%), the S&P BSE Bankex (down 2.14%) and the S&P BSE Consumer Discretionary Goods & Services index (down 2.11%) underperformed the S&P BSE Sensex.

    Index major Reliance Industries fell 1.01%, ahead of its Q1 June 2019 result today.

    Index heavyweight TCS rose 0.55%. HDFC (down 1.70%) and HDFC Bank (down 1.16%) declined.

    InterGlobe Aviation, parent of air carrier IndiGo, rose 0.32% to Rs 1463.35. The company's net profit surged by over 43 times to Rs 1203.10 crore in Q1 June 2019 compared with net profit of Rs 27.80 crore in Q1 June 2018. Total income rose 43.5% to Rs 9786.90 crore in Q1 June 2019 over Q1 June 2018. The result was announced after market hours today, 19 July 2019.

    Dabur India fell 1.86%. to Rs 421. The company's consolidated net profit rose 10.25% to Rs 363.81 crore on 9.26% increase in net sales to Rs 2,273.29 crore in Q1 June 2019 over Q1 June 2018. The result was announced during market hours today, 19 July 2019.

    Cement major ACC fell 1.51% to Rs 1543.55 after consolidated net profit rose 38.62% to Rs 455.64 crore on 8.33% increase in total income to Rs 4206.18 crore in Q2 June 2019 over Q2 June 2018. The result was announced after market hours yesterday, 18 July 2019.

    ACC said the cement industry witnessed weak off-take in Q2 June 2019 due to the slow pace of construction activity. Cost increase on account of higher fuel prices year on year, was partly mitigated by lower cost of raw materials, improvement in operating efficiency and lower fixed cost. Operating EBITDA rose 25% to Rs 783 crore in Q2 June 2019 over Q2 June 2018.

    Cyient fell 11.43% after the company announced its Q1 June 2019 result after market hours yesterday, 18 July 2019. On a consolidated basis, Cyient's net profit fell 49.57% to Rs 90.50 crore on a 6.35% fall in the net sales to Rs 1089 crore in Q1 June 2019 over Q4 March 2019.

    Private sector banks fell across the board. Yes Bank (down 2.97%), Kotak Mahindra Bank (down 2.46%), ICICI Bank (down 2.05%), City Union Bank (down 1.59%), Axis Bank (down 1.54%) and Federal Bank (down 0.3%) edged lower.

    Induslnd Bank fell 3.40%. The bank today inaugurated a branch at Kolkata. With this, the bank now has a network of 62 branches across West Bengal.

    RBL Bank fell 13.71%. The bank's net profit increased 40.5% to Rs 267.05 crore on a 48.1% rise in total income to Rs 2,503.88 crore in Q1 June 2019 over Q1 June 2018. Gross NPA has increased from Rs 595.94 crore in Q1 June 2018 to Rs 789.21 crore in Q1 June 2019. Provision coverage ratio increased from 60.41% in Q1 June 2018 to 69.13% in Q1 June 2019.

    Commenting on the performance Vishwavir Ahuja, MD & CEO, RBL Bank said The bank has had a good quarter of strong performance and has continued to maintain its growth momentum and improvement in operating metrics. However, given the difficult environment we do expect to face some challenges on some of our exposures in the near term. At the same time, given the strong momentum in our businesses, we do expect to maintain a healthy profitable growth over the coming quarters.

    Public sector banks tumbled. Bank of Maharashtra (down 3.86%), Syndicate Bank (down 3.36%), Corporation Bank (down 2.87%), Bank of Baroda (down 2.8%), Bank of India (down 2.43%), Central Bank of India (down 2.31%), Indian Bank (down 2.27%), Allahabad Bank (down 2.15%), State Bank of India (down 2.1%), Union Bank of India (down 1.6%), United Bank of India (down 1.52%), IDBI Bank (down 1.45%), Punjab & Sind Bank (down 1.41%), Canara Bank (down 1.21%), Punjab National Bank (down 0.48%), Andhra Bank (down 0.45%) and UCO Bank (down 0.28%) edged lower.

    Auto stocks witnessed selling. Mahindra & Mahindra (down 4.36%), Eicher Motors (down 3.96%), Escorts (down 3.81%), Hero MotoCorp (down 3.71%), TVS Motor Company (down 3.4%), Bajaj Auto (down 2.86%), Ashok Leyland (down 2.52%) and Maruti Suzuki India (down 1.95%) edged lower.

    Tata Motors fell 3.73%. The auto major said that it has incorporated a wholly owned subsidiary company named Brabo Robotics and Automation with effect from 17 July 2019. Brabo Robotics and Automation is engaged in manufacture of machinery and equipment relating to factory automation and robotics. The announcement was made after market hours yesterday, 18 July 2019.

    Finance minister Nirmala Sitharaman on Thursday declined to remove or relax the applicability of the new surcharge on the super rich on foreign portfolio investors (FPIs), but advised those staring at an increase in tax outflows to shift to the corporate structure where the Budget has not made any change in tax treatment.

    Replying to a debate on the Finance Bill in the Parliament on 18 July, Finance Minister Nirmala Sitharaman dismissed the argument of the Opposition that the tax would lead to a flight of foreign portfolio investors (FPIs). It will have an impact on FPIs registered as trusts. There is an option for FPIs to register as companies. If they are registered as companies, they don't have a problem with this new tax, Sitharaman said. She said a trust was treated as an individual entity and came under the tax.

    Sitharaman in her maiden Budget speech on 5 July 2019, proposed to enhance surcharge on individuals having taxable income from Rs 2 crore to Rs 5 crore and Rs 5 crore and above so that effective tax rates for these two categories will increase by around 3% and 7% respectively. The effective tax rate on the highest tax bracket goes up to 42.7% after the hike.

    There are concerns that the increased surcharge on super-rich could also affect foreign funds investing in India since a same tax structures apply for individuals, Hindu Undivided Family (HUF) and Associations of Persons (AOPs). FPIs, including pension and retirement funds, educational endowment fund, etc, come in through trusts or AOPs route because it has been the most tax-efficient structure.

    The Lok Sabha passed the Finance Bill by voice vote, completing the budget process for 2019-20 in the Lower House. It will now go to the Rajya Sabha. A money bill does not need Upper House approval.

    Meanwhile, Asian Development Bank on 18 July 2019 lowered India's GDP growth forecast to 7% for the current year on the back of fiscal shortfall concerns. India is expected to grow by 7% in 2019 (FY20) and 7.2% in 2020 (FY21), slightly slower than projected in April because the fiscal 2018 outturn fell short, ADB said in its supplement to the Asian Development Outlook 2019. For the south Asian region, ADB said the outlook remains robust, with growth projected at 6.6% in 2019 and 6.7% in 2020.

    In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 68.925, compared with its close of 68.97 during the previous trading session.

    In the commodities market, Brent crude for September 2019 settlement rose $1.02 at $62.95 a barrel. The contract fell $1.73 or, 2.72% to settle at $61.93 a barrel in the previous trading session.

    Oil prices bounce back after the US Navy shot down an Iranian drone in the Strait of Hormuz, a key checkpoint for global crude flows.

    The International Energy Agency (IEA) does not expect oil prices to rise significantly because demand is slowing and there is a glut in global crude markets, IEA executive director was quoted by the media as saying. Electric vehicles are not expected to make a dent on crude demand in India and elsewhere, IEA's Fatih Birol said, adding that he expects India's oil demand to continue rising. The IEA is reducing its 2019 oil demand forecast due to a slowing global economy amid a US-China trade spat, and may cut it again if the global economy and especially China shows further weakness, Birol told the media on 18 July.

    Overseas, Europe shares were trading higher while Asian markets closed on a positive note on Friday, as comments from US Federal Reserve official cemented expectations of a US interest rate cut later this month.

    US stocks closed higher Thursday, after New York Federal Reserve President John Williams said the central bank's wisest strategy is to cut interest rates at the first sign of economic distress when interest rates are already low.

    The Fed is widely expected to cut interest rates at the conclusion of its two-day July 30-31 policy meeting.

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