Benchmarks extend losses; RBI maintains repo rate at 6.5%

Indian equity benchmarks extended losses in morning deals, as the Reserve Bank of India's monetary policy committee (MPC) kept the repo rate unchanged at 6.5 per cent for the ninth time in a row. The central bank maintained its hawkish stance due to persistently high food inflation. The RBI also keeps the gross domestic product (GDP) growth projection unchanged at 7.2 per cent for the financial year 2024-25 (FY25). Besides, continuous foreign fund outflows and weak trend in the U.S markets also drove domestic equities lower. According to exchange data, foreign institutional investors (FIIs) were net sellers in the capital markets on Wednesday as they offloaded shares worth Rs 3,314.76 crore. Traders took a note of 16th Finance Commission chairman Arvind Panagariya’s statement that India needs to open its economy further, privatise banks and introduce factor market reforms to lift its growth beyond 6.5-7% levels. 

On the global front, Asian markets are trading in red following the broadly negative cues from Wall Street overnight, as stocks wilted under pressure amid concerns about the outlook for the U.S. economy, despite US Fed officials reassuring markets that the world's largest economy is not headed for a recession. Heightened geopolitical tensions are also weighing on the markets. Back home, on the sectoral front, mining stocks remained in watch as Mines Secretary V L Kantha Rao stated that the mines ministry is working on rolling out the Critical Mineral Mission this year.  Union Budget 2024-25 has proposed launching Critical Mineral Mission for domestic production, recycling of critical minerals, and overseas acquisition of critical mineral assets. Its mandate will include technology development, skilled workforce, extended producer responsibility framework, and a suitable financing mechanism. 

The BSE Sensex is currently trading at 79041.65, down by 426.36 points or 0.54% after trading in a range of 78897.92 and 79422.15. There were 6 stocks advancing against 24 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index fell 0.03%, while Small cap index was up by 0.43%.

The few gaining sectoral indices on the BSE were Healthcare up by 0.97% and Telecom up by 0.41%, while Metal down by 1.17%, Oil & Gas down by 1.11%, IT down by 0.98%, Energy down by 0.95% and PSU down by 0.85% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 1.99%, Sun Pharma up by 0.38%, Titan Company up by 0.27%, Tech Mahindra up by 0.25% and ITC up by 0.20%. On the flip side, Infosys down by 2.06%, Power Grid Corporation down by 1.85%, Larsen & Toubro down by 1.60%, JSW Steel down by 1.55% and Ultratech Cement down by 1.36% were the top losers.

Meanwhile, the Finance Bill 2024 was passed by Lok Sabha with a few amendments moved by the government. Finance Minister Nirmala Sitharman said the approach of the government has been to bring greater simplification of tax laws and procedures and enable growth and employment in the country. The Finance Minister clarified that in real estate, the roll over provisions have not been withdrawn and are applicable. She said if the capital gain in a property transaction is invested in buying another one or two properties up to a maximum value of Rs 10 crore, no capital gain tax is required to be paid on such profits. 

Capital gains can also still be invested in bonds which are notified under Section 54 of the Income Tax Act up to a maximum of Rs 50 lakh annually and save on taxes. To give relief on budget proposals, she also moved an amendment in the Finance Bill on the changes in the capital gains tax on property transactions. The amendment implies that taxpayers can avail either a lower tax of 12.5 per cent without indexation or a rate of 20 per cent with indexation, if the property is acquired prior to July 23, 2024, the day union budget was presented in the Lok Sabha.

She clarified that taxpayers can compute taxes under both provisions and choose to pay tax under the scheme where lower tax is applied. Effectively, July 23, 2024, is now set as the cut-off date for the calculation of the capital gains versus the earlier cut-off of 2001. She said she has proposed these amendments as some members have raised hypothetical calculation to prove that under new provisions taxpayers will have to pay higher taxes. The new tax proposals on capital gains tax was brought in to bring in parity among different asset classes like equities, mutual funds and real estate.

In the Finance Bill introduced on July 23, the Finance Minister had proposed a flat long term capital gains tax of 12.5 per cent with no indexation benefits, prior to it property transactions used to be taxed at 20 per cent with indexation benefit. She also clarified that the grandfathering proposal will be allowed only for individual and Hindu Undivided Family (HUF) taxpayers and not for companies and Non Resident Individuals. They have to pay flat 12.5 per cent LTCG tax without indexation.

The CNX Nifty is currently trading at 24171.20, down by 126.30 points or 0.52% after trading in a range of 24119.30 and 24263.50. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 2.01%, Cipla up by 1.91%, Dr. Reddy's Lab up by 1.05%, Divi's Lab up by 0.69% and Sun Pharma Industries up by 0.46%. On the flip side, Infosys down by 2.02%, Power Grid Corp down by 1.80%, BPCL down by 1.78%, Tata Consumer Product down by 1.58% and LTIMindtree down by 1.52% were the top losers.

Asian markets are trading in red; Jakarta Composite plunged 9.95 points or 0.14% to 7,202.18, KOSPI dropped 16.04 points or 0.62% to 2,552.37, Nikkei 225 slipped 174.45 points or 0.5% to 34,915.17 and Taiwan Weighted lost 412.98 points or 1.94% to 20,882.30. On the other hand, Hang Seng advanced 120.59 points or 0.71% to 16,998.45, Shanghai Composite strengthened 10.78 points or 0.37% to 2,880.61 and Straits Times rose 8.21 points or 0.25% to 3,257.93.