Market gives up gains

Key benchmark indices erased intraday gains and were hovering near flat line in afternoon trade. At 13:16 IST, the barometer index, the S&P BSE Sensex was up 1.95 points or 0.01% at 28,061.89. The Nifty 50 index was currently up 5.40 points or 0.06% at 8,655.70. It has been a lacklustre trading session so far. Investors were exercising caution ahead of the expiry of the near month August 2016 contracts in the futures & options (F&O) segment. The August 2016 F&O contracts are set to expire today, 25 August 2016.

The Sensex fell 11.38 points or 0.04% at the day's low of 28,048.56 in afternoon trade. The barometer index rose 94.27 points or 0.33% at the day's high of 28,154.21 in early trade, its highest level since 19 August 2016. The Nifty rose 2.15 points or 0.02% at the day's low of 8,652.45 in afternoon trade. The index rose 32.75 points or 0.37% at the day's high of 8,683.05 in early trade, its highest level since 22 August 2016.

The market breadth indicating the overall health of the market was positive. On BSE, 1,289 shares rose and 1,232 shares declined. A total of 190 shares were unchanged. The BSE Mid-Cap index was currently up 0.12%. The BSE Small-Cap index was currently up 0.26%. Both these indices outperformed the Sensex.

In overseas stock markets, mining stocks led losses for European shares. The latest data showed that Spain's economy expanded 0.8% in the second quarter, higher than initial estimates of 0.7% growth. Compared to the same period last year, the eurozone's fourth largest economy expanded by 3.2%. Asian stocks witnessed a mixed trend ahead of Federal Reserve Chairwoman Janet Yellen's speech tomorrow, 26 August 2016, which could provide hints about the timing of the next rate hike from the Fed. US stocks closed lower yesterday, 24 August 2016, with healthcare stocks leading the decline triggered by intensifying outrage over the pricing of a lifesaving drug by Mylan Inc. Meanwhile, Yellen is due to speak tomorrow, 26 August 2016, at the Kansas City Fed's annual Monetary Policy Symposium in Jackson Hole, Wyoming. Minutes from the Federal Open Market Committee's (FOMC) July meeting showed officials were split on whether an increase in interest rate was needed soon.

Metal shares edged lower. Hindustan Copper (down 1.83%), Steel Authority of India (down 1.01%), Vedanta (down 0.97%), NMDC (down 0.46%), Tata Steel (down 0.25%), Bhushan Steel (down 0.24%), JSW Steel (down 0.08%), Hindalco Industries (down 0.06%) and Hindustan Zinc (down 0.02%), edged lower. National Aluminium Company (up 0.32%) and Jindal Steel & Power (up 0.69%), edgd higher.

Meanwhile, copper price edged higher in the global commodities markets. High Grade Copper for December 2016 delivery was currently up 0.38% at $2.093 per pound on the COMEX.

Pharmaceutical shares were in demand. Wockhardt (up 4.36%), Cadila Healthcare (up 3%), IPCA Laboratories (up 1.52%), Aurobindo Pharma (up 1.30%), Cipla (up 0.95%), Glenmark Pharmaceuticals (up 0.91%), Dr Reddy's Laboratories (up 0.89%), Strides Shasun (up 0.68%), Divi's Laboratories (up 0.46%), Lupin (up 0.42%), Alkem Laboratories (up 0.32%), Sun Pharmaceutical Industries (up 0.30%) and GlaxoSmithKline Pharmaceuticals (up 0.19%), edged higher. Piramal Enterprises was down 0.82%.

AstraZeneca Pharma India fell 5.96% after AstraZeneca UK terminated distribution arrangements for Meronem (meropenem), a key drug in India. The termination was a result of global agreement by a parent firm AstraZeneca PLC to sell the development and commercialisation rights to Pfizer Inc, of its late stage small molecule antibiotics business. Meronem is a carbapenem anti-bacterial used for the treatment of serious infections in hospitalised patients. Meronem generated 18% of the total turnover of AstraZeneca Pharma India in the year ended 31 March 2016 (FY 2016). The current distribution arrangements for Meronem in India will terminate in six months from 24 August 2016.

Meanwhile, the Union Cabinet yesterday, 24 August 2016, approved amendments to the Double Taxation Avoidance Agreement (DTAA) with Cyprus, which could impact foreign portfolio investment and foreign direct investment into India from Cyprus. With the revision of the treaty, India will have the right to tax capital gains arising in India for entities resident in Cyprus. All existing investments from Cyprus and additional investments made up to 31 March 2017 will be grandfathered like the Mauritius Treaty and therefore capital gains tax will not be applicable on shares acquired prior to 1 April 2017. According to a government statement, the proposed DTAA with Cyprus also expands the scope of the Permanent Establishments (PE) that enables source based taxation of business income.

As per media reports, foreign direct investment into India from Cyprus totaled $3.3 billion in 2015-16. Companies based in Europe and the US use Cyprus to route investments in India to take advance of the tax treaty, reports suggest. The Indian government is also in discussion with Singapore for amending tax treaty with Singapore.

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