Sensex falls for 4th day amid GST Bill debate

The Indian markets on Wednesday fell for the fourth straight session tracking losses in other emerging markets, as crude oil prices fell below $40 a barrel. Investors turned cautious, as they awaited the passage of the goods and services tax (GST) Bill in the Upper House.

The benchmark indices fell the most in a month, while the midcap index dropped the most in five months. The Sensex closed at 27,697.51, down 284.2, or 1.02 per cent, while the Nifty 50 index lost 78 points, or 0.9 per cent, to end at 8,544.85. The NSE Midcap index fell nearly two per cent.

Fuelled by overseas flows of $1.7 billion in July, the midcap indices have soared to all-time highs, while the Sensex touched its highest level in 15 months. The sharp gains in the stock prices had sent valuations above their long-term averages. Most Asian markets, the MSCI Emerging Market (EM) Index and the European markets also traded weak amid weakness in oil prices and uncertainty in Europe.

Shares of automobile and logistics companies fell sharply on Wednesday after running up sharply in recent weeks on hopes of successful passage of the GST Bill. Companies in these sectors are expected to gain the most from a more unified tax regime.

According to experts, the GST Bill has been priced in by the market. However, they did not rule out further gains after the Bill gets cleared.

“Even as the markets had largely discounted the passage of the GST Bill, and sold off in sympathy with the global markets, we'll see some spurt after the final results come out,” said Kamlesh Rao, CEO of Kotak Securities. “In the immediate term, markets will now closely watch the remaining quarterly results and the ensuing RBI meeting.”

Recent outperforming stocks such as Maruti Suzuki, ITC and Power Grid were among the biggest losers on the Sensex. Shares of logistics companies including Transport Corporation of India, Gati and Snowman Logistics fell five per cent each. Other big gainers including Bajaj Finance and M&M Finance also fell 8.6 per cent and 4.2 per cent, respectively.

Foreign institutional investors (FIIs) continued to remain strong buyers, while heavy selling was seen from domestic institutional investors (DIIs) on Wednesday. FIIs were net buyers to the tune of nearly Rs 600 crore, while DIIs sold shares worth Rs 800 crore, provisional data provided by stock exchanges showed.

“Discussion on the GST Bill was on in Parliament when the markets closed. So the impact of its actual outcome would reflect on Thursday in early trades. Interestingly, Nifty, after the recent slide, has reached closer to its immediate support of 8,500 and we expect consolidation to take place now,” said Jayant Manglik, president (retail distribution), Religare Securities.

The Sensex had posted the fifth straight month of gain in July. The Sensex is now valued at 16 times its one-year forward earnings estimate, the highest since April 2015.

With inputs from agencies