LTCG Tax & Weak Global Cues Continue To Trouble The Market

Market This Week

The market started the week sharply lower on Monday as Sensex declined over 500 points while Nifty fell below 10,600 owing to global weakness but in late in the session market recovered some losses. On Tuesday bloodbath continued on D-street as Sensex dipped days low of 1,200 points while Nifty fell almost 400 points. Broader market also dipped 2-4%. On Wednesday market opened positive ahead of MPC outcome but closed sharply lower as RBI kept the rate unchanged. On Thursday market showed strong recovery as Sensex rallied over 500 points and Nifty climbed above 10,600 but due to late profit booking closed below 10,600. Nifty midcap and smallcap outperformed benchmark indices as it rallied 2-4%. On last trading day of the week, market cracked as Sensex lost over 500 points and Nifty traded around 10,400 levels due to weak global cues.

This week the broader market outperform equity benchmark as Nifty midcap and smallcap gained some positive rally despite weakness in the market. Global peers remained weak throughout the week as US, Europe and Asian market showed big sell-off.

Movers & Shakers

Auto components major Bharat Forge has reported a 77.39 percent jump in net profit at Rs.228.17 crore for the quarter ended December 31, 2017. The company had posted a net profit of Rs.128.62 crore in the same period previous fiscal. The companys revenue from operations stood at Rs.1,390.55 crore against Rs.990.01 crore in the same period of the previous fiscal, Bharat Forge said in a regulatory filing. Founder Baba Kalyani said the company had secured new orders worth USD 60 million in November 2017 - January 2018 period and USD 100 million year-to-date FY18, and amongst the bulk order won are passenger vehicles and industrial application. The companys share gained 12-13% this week.

Natco Pharma, in Q3FY18, reported 16.1% YoY decline in the revenues to Rs.562.1 crore vs. Rs.669.9 crore in Q3FY17. EBITDA grew 10.1% YoY to Rs.286.5 crore from Rs.260.2 crore. EBITDA margins were at 51% in Q3FY18 vs. 38.8% in Q3FY17 and 28.6% in Q2FY18. Net profit grew 11.5% YoY to Rs.217.4 crore vs. Rs.194.9 crore. The share lost 12-15% throughout the week.

Key Market Drivers

The Indian service sector continued in expansion mode in January, recording the quickest rise in activity in three months driven by a renewed increase in new business orders, says a monthly survey. The seasonally adjusted Nikkei Services Business Activity Index grew to 51.7 in January, up from 50.9 in December, indicating a faster expansion. The index remained above the neutral mark of 50 in January, that separates growth from contraction for the second consecutive month. In November, the index stood at 48.5.

The government on Tuesday doubled import duty on sugar to 100 percent and raised duty on chana to 40 percent to protect domestic farmers. At present, customs duty or import tax on sugar is 50 percent and that on chana (chickpeas) is 30 percent. The move is directed at controlling cheaper imports and ensuring profitable prices to domestic producers.

RBI maintains status quo on policy rate, cuts FY18 GVA growth to 6.6%, policy stance neutral. Some of the key highlights of MPC outcome:-

It raised its March-end Consumer Price Index (CPI) inflation forecast to 5.1% and projected an inflation range of 5.1-5.6% in the first half of the next fiscal year.

On growth, the RBI has cut the growth forecasts for the current fiscal to 6.6% from 6.7% earlier. For the next financial year, it has projected gross value added (GVA) growth of 7.2%.

A stabilising goods and services tax (GST) regime, improving credit offtake, rising capital goods production and recapitalisation of banks augur well for growth, the panel noted.

The association of National Exchanges Members of India (ANMI) will seek set off of Securities Transaction Tax (STT) against long-term capital gains tax (LTCG) from the Finance Ministry. According to ANMI, the implementation of both STT and LTCG may lead to job losses with no major benefit to government revenues.

China's January Trade data showed exports rose 11.1 percent to USD 200.5 billion, up from December's 10.9 percent growth. Imports rose 36.9 percent to USD 180.1 billion, up from the previous month's 4.5 percent. Import growth was driven in part by demand from companies that are restocking before closing down for the Lunar New Year holiday. The holiday falls at different times each year in January or February, distorting trade data.

No GST on affordable housing buyers! Big step by Modi govt. The big development comes after the GST Council, in its last meeting on January 18, had extended the concessional rate of 12 percent GST for construction of houses under the Credit Linked Subsidy Scheme (CLSS) to promote affordable housing, which has been given infrastructure status in 2017-18 Budget.

The US government today was assured of careening into a shutdown at midnight after the Senate adjourned with no vote on a measure to extend federal funding beyond the 12:00 am the deadline.

Event Watch

MSCI Quarterly Index Review will be on 12th Feb. 2018.

Indias CPI, IIP December & January data will be presented on 12th Feb. 2018, also WPI data will be on 15th Feb. 2018.

Q3 Quarterly results of the companies like Bank Of India, Britannia, GAIL, NMDC, Sun Pharma, BKI, Tata Power will be present next week.

Stocks To Watch

Cipla Limited is on the upside while Info Edge (India) limited is on the downside.