Domestic indices trade higher with decent gains in early deals

Indian equity benchmarks made optimistic start on Monday tracking mostly positive global cues. Domestic indices are trading higher with decent gains in early deals amid foreign fund inflows. The foreign institutional investors (FIIs) turned net buyers on August 16 as they bought equities worth Rs 766 crore. Traders took note of International Monetary Fund’s (IMF) deputy managing director Gita Gopinath’s statement that India should invest in creating a skilled workforce, putting in place a better infrastructure while undertaking land, labour and taxation reforms to meet its aspiration to become a developed country by 2047. Besides, a government survey showed that the unemployment rate in urban areas for individuals aged 15 years and above was 6.6 per cent in April - June 2024 (Q1 FY25), remaining unchanged from the first quarter of FY24. As per the Periodic Labour Force Survey, India's unemployment rate for the quarter ended on June 30 declined from Q4 FY24 when the rate stood at 6.7 per cent. 

On the global front, Asian markets are trading mostly higher amid growing optimism that the U.S. economy is headed for a soft landing after upbeat US retail sales data and improving US consumer sentiment, which also increased confidence the US Fed will start cutting interest rates next month, but less aggressively. On the sectoral front, stocks of construction equipment industry are in focus as data released by the Indian Construction Equipment Manufacturers' Association (ICEMA) showed that India's construction equipment industry witnessed a 5 per cent rise in sales to 28,902 units during the April-June quarter of 2024-25. As per the data, the construction equipment (CE) industry had sold 27,577 units in the same period of the previous fiscal. In stock specific development, DCX Systems locked at upper circuit on bagging Rs 107.09 crore work orders.

The BSE Sensex is currently trading at 80568.35, up by 131.51 points or 0.16% after trading in a range of 80497.90 and 80724.40. There were 20 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index jumped 0.84%, while Small cap index was up by 1.31%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 2.08%, Energy up by 1.65%, PSU up by 1.62%, Utilities up by 1.36% and Power up by 1.17%, while Auto down by 0.14% was the sole losing indices on BSE.

The top gainers on the Sensex were NTPC up by 1.82%, SBI up by 1.36%, Tata Steel up by 1.20%, Titan Company up by 1.06% and ITC up by 1.05%. On the flip side, Mahindra & Mahindra down by 1.22%, Nestle down by 0.83%, Axis Bank down by 0.57%, Tata Motors down by 0.53% and HDFC Bank down by 0.42% were the top losers.

Meanwhile, International Monetary Fund (IMF) deputy managing director Gita Gopinath has said that India will need to undertake more reforms to be able to continue on the path of raising economic growth and to make sure that enough job creation happens in the country. Gopinath further said that India will be required to reduce import tariffs if it wants to be an important player in the global supply chains. She added ‘The significant improvements have been made by the government over the years in terms structural reforms’. While noting that the world is in an environment where trade integration has been questioned, Gopinath said it is important for India to remain open for global trade.

She said ‘Tariff rates in India are higher than in its other peer economies. If it wants to be an important player on the world stage and an important part of global supply chains, it is going to require reducing those tariffs’. She said it is a tremendous aspiration to get to a developed country status but it does not happen automatically, and requires ongoing, consistent efforts, pretty broad scale, across many areas to deliver on that. She also said ‘India has grown well in terms of its overall growth rate, and at 7 per cent, it is the fastest growing major economy in the world. The question is, how does one keep up the momentum and raise it further so that you can increase per capita incomes in India to get to being an advanced economy.’

About taxation, she said India has parallels with other developing countries, where most of the tax revenue that is collected is indirect taxes and not direct taxes, not in form of income taxes. She said ‘We have been advising other developing countries too, that it is helpful to broaden the personal income tax base and so that you can have more income coming from there’. Referring to the cut in corporate tax rate by the Modi government, she said although it was helpful it is less the tax rate that matters, but what matters is just making sure that there are no loopholes and there are not too many leakages that happen in terms of tax exemptions. She said ‘It is very important to have sufficient progressivity in your tax system...making sure that you are (India) getting enough from your capital gains tax from your capital income tax is going to be critical’. She also suggested that now there is better technology to implement property tax and this is again another area where work is needed.

The CNX Nifty is currently trading at 24605.50, up by 64.35 points or 0.26% after trading in a range of 24576.25 and 24638.80. There were 33 stocks advancing against 17 stocks declining on the index.

The top gainers on Nifty were BPCL up by 2.98%, ONGC up by 2.20%, Hindalco up by 2.08%, Shriram Finance up by 2.02% and Hero MotoCorp up by 1.81%. On the flip side, Mahindra & Mahindra down by 1.21%, HDFC Life Insurance down by 1.06%, Grasim Industries down by 1.00%, Apollo Hospital down by 0.79% and Nestle down by 0.77% were the top losers.

Asian markets are trading mostly in green; Hang Seng surged 184.46 points or 1.05% to 17,614.62, Taiwan Weighted advanced 50.87 points or 0.23% to 22,400.20, Shanghai Composite strengthened 15.14 points or 0.52% to 2,894.57, Jakarta Composite gained 9.75 points or 0.13% to 7,441.84 and Straits Times rose 0.49 points or 0.01% to 3,353.38. On the other hand, Nikkei 225 slipped 350.02 points or 0.92% to 37,712.65 and KOSPI dropped 10.20 points or 0.38% to 2,687.03.