Benchmarks end flat with negative bias

Indian equity benchmarks, after a steep sell-off seen in the morning deals, clocked a steady recovery during the day and ended flat with negative bias on Thursday amid the monthly F&O expiry for the July series. Both indices saw a bloodbath as they opened for trade and remained in red for most part of the day, tracking sell-off in the global markets. Heavy foreign fund outflows after a hike in securities transaction tax and short-term capital gains tax also impacted markets’ sentiment negatively. Traders got cautious, amid a private report stating that foreign investors sold nearly $1 billion worth of Indian equities in the two days since the government raised taxes on derivatives trades and on capital gains from equity investments in its annual budget.

However, markets managed to recover most of the lost ground in late afternoon deals, as traders took support with Revenue Secretary Sanjay Malhotra’s statement that the direct tax slabs rejig announced in the Union Budget amounting to savings of Rs 17,500 for the middle class along with an increase in the rebate limit to Rs 7 lakh in the new tax regime last year is ‘sufficient’ relief over a period of two years. Some support also came with report that global credit rating agencies have given thumbs up to the FY25 Budget, lauding the government's firm commitment to deficit reduction, with Moody’s Ratings noting that the Budget is credit positive. Meanwhile, the Central Board of Direct Taxes (CBDT) Chairman Ravi Agrawal said that about 66 per cent of taxpayers out of the over 40,000,000 filers have opted for the new regime for income tax return (ITR) filing during the current season till now. He noted that the focus of the government and the direct taxes administration is on simplification of the tax processes including filing of ITRs and conduct of other businesses with the Income Tax Department.   

On the global front, European markets were trading lower as concerns over Chinese demand and weak German business sentiment data also weighed on markets. Asian markets settled down on Thursday as a disappointing start of the mega-cap U.S. earnings season prompted investors to pull back on the artificial-intelligence frenzy. A surprise rate cut in China also offered a reality check regarding the challenges facing the world's second-largest economy.  Back home, on the sectoral front, cement industry stocks were in focus, as India Ratings and Research’s (Ind-Ra) report showed that India’s cement demand is likely to be supported by the government’s sustained focus on capex towards infrastructure projects in the budget of FY25, albeit at a moderated pace of growth of 5%-7% YoY (FY24: 8%-9%) as expected by the agency. Stocks related to gems and jewellery sector were in watch as the Central Board of Indirect Taxes and Customs (CBIC) Chairman Sanjay Kumar Agarwal stated that the government’s decision to cut too high import duty on gold will help in containing smuggling and boost the country's exports of gems and jewellery.  

Finally, the BSE Sensex fell 109.08 points or 0.14% to 80,039.80, and the CNX Nifty was down by 7.40 points or 0.03% points to 24,406.10.

The BSE Sensex touched high and low of 80,143.10 and 79,477.83 respectively. There were 13 stocks advancing against 17 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 0.22%, while Small cap index was down by 0.14%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 2.93%, Energy up by 1.71%, Auto up by 1.23%, Capital Goods up by 1.04% and Power up by 1.00%, while Metal down by 1.19%, Bankex down by 1.10%, Consumer Durables down by 0.84%, Realty down by 0.80%, Telecom down by 0.65% were the losing indices on BSE. 

The top gainers on the Sensex were Tata Motors up by 6.17%, Larsen & Toubro up by 2.94%, Sun Pharma up by 2.81%, Kotak Mahindra Bank up by 1.67% and HDFC Bank up by 0.72%. On the flip side, Axis Bank down by 5.19%, Nestle down by 2.49%, ICICI Bank down by 2.02%, Titan Company down by 1.95% and Tata Steel down by 1.78% were the top losers.

Meanwhile, the Central Board of Indirect Taxes and Customs (CBIC) Chairman Sanjay Kumar Agarwal has said that the government’s decision to cut too high import duty on gold will help in containing smuggling and boost the country's exports of gems and jewellery.  The Budget has announced a drastic cut in import duty on the precious metal to 6 per cent from 15 per cent. He said that the duty was hiked in July 2022 as at that time there was a worsening current account deficit (CAD) due to the geo-political situation. To cut down on the non-essential imports, the duty was increased. 

CBIC Chairman stated that in the last financial year, seizures of gold made by Customs formation and the DRI together were around 4.8 tonnes, up from 3.5 tonnes in 2022-23. CAD in 2022-23 was 2 per cent of GDP, which came down to 0.7 per cent in 2023-24. In the March quarter, it was a surplus. Gold is the raw material used in the gems and jewellery sector where a lot of employment is generated. He said that almost 50 lakh people are employed and exports are to the tune of 8 per cent from this sector. He said if the rate of duty remains very high that blocks the capital for manufacturing the jewellery and value addition that happens in the country. 

He also said it was noticed that after the duty was hiked to 15 per cent, the importers resorting to bringing the gold in other than bullion form also under various free trade agreements (FTAs) to escape the levy. He said ‘this subterfuge was also resulting in not realising the full impact of the customs duty and we also noticed that there was a rise in smuggling of gold’. With 15 per cent duty, there is a huge arbitrage between the domestic prices of gold and the international prices. All these factors kept in mind in the Budget proposal of reduction of duty on gold and precious metal where the duty move in tandem with the rate of duty on gold.

The CNX Nifty traded in a range of 24,426.15 and 24,210.80. There were 25 stocks advancing against 25 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 5.97%, ONGC up by 4.83%, BPCL up by 3.67%, SBI Life Insurance up by 3.62% and Larsen & Toubro up by 2.91%. On the flip side, Axis Bank down by 5.08%, Nestle down by 2.50%, ICICI Bank down by 2.14%, Titan Company down by 2.11% and Tata Steel down by 1.75% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 59.35 points or 0.73% to 8,094.34, France’s CAC fell 157.24 points or 2.09% to 7,356.49 and Germany’s DAX lost 259.13 points or 1.41% to 18,128.33.

Asian markets settled down on Thursday ahead of the release of US GDP and PCE price index data, which could offer more clues on when the US central bank will cut interest rates this year and by how much. Market sentiments weakened further on Wall Street’s overnight fall as disappointing earnings from Tesla and Alphabet prompted investors to pull back on the artificial-intelligence frenzy. Japanese shares led regional losses as the yen rose to its strongest level against the dollar in 2-1/2 months ahead of a Bank of Japan policy meeting next week, where a rate hike may be on the table. Seoul shares dropped by tracking sell-off in megacap US technology shares and after data showed South Korea's economy contracted in the second quarter. Chinese shares dipped, even as China’s central bank surprised markets again by cutting another key policy rate to try to offset a weakening economy and a housing market crisis.