Key benchmark indices once again slipped into the red after regaining positive zone in mid-afternoon trade. The barometer index, the S&P BSE Sensex, was down 79.09 points or 0.31%, off close to 180 points from the day's high and up about 130 points from the day's low. The market breadth indicating the overall health of the market was weak. The Economic Survey 2013-14 presented by Finance Minister Arun Jaitely as precursor to tomorrow's Union Budget 2014-15 calls for fiscal consolidation through higher tax-GDP ratio, shifting subsidy programmes away from price subsidies to income support and a simple, predictable and stable tax regime consisting of a single-rate goods and services tax (GST), fewer exemptions in direct taxes, and a transformation of tax administration.
IT stocks edged lower. Real estate stocks also declined.
At 14:20 IST, the S&P BSE Sensex was down 79.09 points or 0.31% to 25,503.02. The index jumped 101.86 points at the day's high of 25,683.97 in early trade. The index slumped 212.90 points at the day's low of 25,369.21 in morning trade, its lowest level since 30 June 2014.
The CNX Nifty was down 22.45 points or 0.29% to 7,600.75. The index hit a high of 7,650.10 in intraday trade. The index hit a low of 7,551.65 in intraday trade, its lowest level since 30 June 2014.
The market breadth indicating the overall health of the market was weak. On BSE, 1,837 shares declined and 984 shares rose. A total of 97 shares were unchanged.
The BSE Mid-Cap index was down 26.83 points or 0.29% at 9,183.38. The BSE Small-Cap index was down 83.85 points or 0.83% at 10,044.16. Both these indices underperformed the Sensex.
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Among the 30 Sensex shares, 16 fell and the remaining shares rose.
IT stocks edged lower. HCL Technologies (down 2.09% to Rs 1,468.55) TCS (down 2.06% to Rs 2,399.25), Infosys (down 0.4% to Rs 3,320.55), Tech Mahindra (down 1.69% to Rs 2,070.15) and Wipro (down 1.03% to Rs 545) declined.
Real estate stocks declined. D B Realty (down 3.01% to Rs 95.70), Housing Development & Infrastructure (HDIL) (down 0.35% to Rs 92.70), DLF (down 0.17% to Rs 205.50) declined. Unitech rose 1.59% to Rs 28.70.
With respect to the real estate sector, there are expectations that the government will take steps towards providing the long awaited industry status to the real estate sector and provide boost to low cost housing in the Budget. Industry status will help easier access to bank lending for real estate developers. There are also expectations that the tax benefit with respect to interest payment on housing loans will be raised. At present, a maximum deduction of Rs 1.5 lakh is allowed on taxable income towards interest on housing loan.
IndusInd Bank fell 0.01% to Rs 552.45. The stock hit high of Rs 561.95 and low of Rs 545 so far during the day. The bank's net profit rose 25.74% to Rs 421.06 crore on 20.6% rise in total income to Rs 2873.68 crore in Q1 June 2014 over Q1 June 2013. The result was announced during market hours.
A bout of volatility was witnessed as key benchmark indices regained positive terrain after slipping into the red for a brief period after opening higher. Volatility continued as key benchmark indices recouped almost entire intraday losses after a sudden slide in morning trade. The Sensex and the 50-unit CNX Nifty, both trimmed losses after hitting their lowest level in more than a week. Key benchmark indices moved in a narrow range ahead of the presentation of Economic Survey for 2013-14. Key benchmark indices once again slipped into the red in early afternoon trade after the Finance Minister tabled Economic Survey for 2013-14 in parliament. Key benchmark indices trimmed intraday losses in afternoon trade. Key benchmark indices once again slipped into the red after regaining positive zone in mid-afternoon trade.
The Economic Survey 2013-14 predicated a recovery in India's economic growth in 2014-15. It has forecast 5.4% to 5.9% growth in GDP in 2014-15, compared with 4.7% expansion in 2013-14. The survey also states that there are downside risks to the economy arising from a poor monsoon, the external environment and the poor investment climate. The survey recommends that the government needs to move towards a low and stable inflation regime through fiscal consolidation, establishing a monetary policy framework, and creating a competitive national market for food. The survey also discusses the need for revamping some of the social sector schemes such as MNREGA, NRHM, SSA, etc. The survey calls for putting public finances on the sustainable path through fiscal correction, a new Fiscal Responsibility and Budget Management (FRBM) Act with teeth, better accounting practices, greater transparency and improved budgetary management. It argues that improvements on both tax and expenditure are needed to obtain high quality fiscal adjustment. The survey recommends fiscal consolidation through higher tax-GDP ratio than merely reducing the expenditure to GDP ratio.
According to the survey, government expenditure reform should involve three elements: shifting subsidy programmes away from price subsidies to income support, a change in the focus of government spending towards provision of public goods, and a focus on outcomes through an improvement in systems of accountability. The survey calls for a tax regime that is simple, predictable and stable consisting of a single-rate goods and services tax (GST), fewer exemptions in direct taxes, and a transformation of tax administration.
The survey states that tax reform in India can improve the ease of doing business and promote efficiency and productivity growth. There is consensus that the GST will be a major milestone for indirect tax reform in India, the survey notes. The survey suggests implementation of a Central GST (CenGST) as a first step towards GST. Once the CenGST is implemented, and the information technology system for CenGST has worked, estimation risk will be lower and it will be easier for the centre and states to move to the GST, according to the survey.
Just as the GST is a transformation of indirect taxes, the DTC is required as a clean modern replacement for the existing income tax law. As with the GST, the key objective of DTC must be a simplification with a clean conceptual core, and the removal of a large number of special cesses and exemptions that favour special interest groups. The tax system must move away from industrial policy, with incentives for one activity or another, towards a simple framework, according to the survey.
Noting that the industrial growth has slowed down considerably in the recent years, the Economic Survey highlights the need for revival of corporate sector investment, pushing ahead with critical reforms and removal of infrastructure bottlenecks. In order to boost manufacturing sector, the government has already announced setting up of sixteen national investment and manufacturing zones (NIMZs). According to the survey, industrial policy needs to focus on labour-intensive and resource-based manufacturing in informal sector to rejuvenate small businesses. According to the survey, the near term industrial outlook is conditional on continued improvements in the policy environment and quick return to peak investment rate. With the improvement in overall macroeconomic environment, industry is expected to revive and growth can accelerate gradually over the next two years, the survey states.
The pick-up in India's exports in April-May 2014, after five months of low/negative growth, though a positive sign, is partly due to the low base. The quarterly and monthly export and import growth performance of the world and major trading countries is also not very encouraging. Thus world trade and India's exports are still fragile, the recent good performance notwithstanding. There is also the downside risk of external shocks like the latest increase in oil prices owing to the Iraq crisis, according to the survey.
The survey also highlighted several challenges and reforms required in the agriculture sector. The survey states that restoring economic freedom of farmers and allowing them to be part of a competitive national market is essential for controlling food inflation.
The Economic Survey 2013-14 comes just a day ahead of the Union Budget 2014-15. Finance Minister Arun Jaitley will present the final Union Budget for 2014-15 in Lok Sabha at 11:00 IST tomorrow, 10 July 2014. There are expectations that the finance minster will announce measures in the Budget aimed at bolstering economic growth. Increase in outlay on infrastructure sector with focus on stricter and time-bound implementation of projects, initiatives towards investments in agriculture and irrigation aimed at easing supply bottlenecks for food-grains, fiscal prudence with roadmap to reduce the fiscal deficit, a roadmap for reducing the subsidy burden and timeline for implementation of the Goods and Services Tax are some of the expectations from the Budget.
In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 59.73, compared with its close of 59.78/79 on Tuesday, 8 July 2014.
European markets edged lower on Wednesday, 9 July 2014. Key benchmark indices in UK, France and Germany were off 0.01% to 0.3%.
Asian stocks edged lower on Wednesday, 9 July 2014, in a broad based decline in global equities triggered by concerns that equity valuations are too high. Key benchmark indices in China, South Korea, Taiwan, Hong Kong, Singapore and Japan were off 0.08% to 1.55%. Indonesia's Jakarta Composite rose 0.72%.
Consumer-price inflation in China slowed last month, data today showed, while factory gate prices fell at the lowest pace in more than two years. China's consumer price index rose 2.3% in June from a year earlier, after gaining 2.5% in May. The country's measure of producer prices, which hasn't shown a year-on-year increase since January 2012, fell 1.1%. It dropped 1.4% in May.
Trading in US index futures indicated that the Dow may fall 12 points at opening bell on Wednesday, 9 July 2014. US stocks declined on Tuesday, 8 July 2014, in a broad selloff, dropping for a second straight session and driving the Dow Jones Industrial Average below 17,000 as investors turned cautious before the start of earnings season.
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