Key benchmark indices hovered in the positive terrain in mid-morning trade. At 11:25 IST, the barometer index, the S&P BSE Sensex was up 58.18 points or 0.21% at 27,755.69. The gains for the Nifty 50 index were lower than the Sensex's gains in percentage terms. The Nifty was currently up 11.40 points or 0.13% at 8,556.25. The passage of Goods and Services Tax (GST) Constitutional Amendment Bill by the Rajya Sabha yesterday, 3 August 2016 boosted sentiment. Firmness in Asian stocks also supported gains on the bourses.
The GST Bill had already been approved by the Lok Sabha last year. The main objective of the GST is to eliminate excessive taxation. GST is a uniform indirect tax levied on goods and services across a country. The measure would harmonize 11 state and central levies into a national sales tax, reducing business transaction costs. The exact rate of the tax will only be decided in the weeks or months ahead. The passage of the constitutional amendment bill kicks off a legislative marathon in which both the federal and state parliaments will need to pass further laws setting the rate and scope of the GST.
With the Rajya Sabha clearing the constitution amendment bill for introduction of the GST, a key task for the proposed GST Council will be determining the rate of taxation. A decision on the tax rate will have to be ratified by a three-fourth majority of the centre and the states. As per the proposed legislation, the centre will have one-third weightage on its vote and states will have two-third weightage. In its report submitted to the government last December, a panel headed by Chief Economic Adviser Arvind Subramanian had recommended a revenue-neutral rate (RNR) of GST of 15-15.5%, with a standard rate of 17-18% that is to be levied on most goods and all services.
In overseas stock markets, Asian stocks rose as crude oil held onto its recovery and high-yielding currencies climbed. US stocks edged higher yesterday, 3 August 2016 as energy companies climbed with the price of oil. Banks also rose, and investors sold traditionally safe stocks. A survey showed that hiring by private companies continued at a solid but uninspiring clip in July. The Bank of England is expected to cut benchmark interest rates after a monetary policy meet later in the global day today, 4 August 2016.
Closer home, the market breadth indicating the overall health of the market was strong. On BSE, 1,389 shares rose and 859 shares fell. A total of 117 shares were unchanged. The BSE Mid-Cap index was currently up 0.51%. The BSE Small-Cap index was currently up 0.6%. Both these indices outperformed the Sensex.
Sugar stocks gained after the Cabinet Committee on Economic Affairs chaired by the Prime Minister Narendra Modi decided yesterday, 3 August 2016 to extend production subsidy to sugar mills which achieve expected performance in respect of export of sugar and supply of ethanol. Balrampur Chini Mills (up 0.77%), Shree Renuka Sugars (up 1.17%), and Baja Hindusthan (up 0.76%) gained. This has been done to offset cost of cane and facilitate timely payment of cane price dues of farmers.
Due to drought situation, there has been significant decline in sugarcane/sugar production in the country by about 1.8 million MT (mMT) and 0.8 mMT respectively. Drought affected States requested to reduce the target of sugar export and ethanol supply due to non-availability of sufficient sugarcane and molasses. Initially, the export quota target was scaled at 15.70 kg of sugar for each tonne of estimated cane crushing. Now, the export quota would be revised on a scale of 15.70 kg of sugar for each tonne of cane actually crushed by the mills during current sugar season or previously notified Minimum Indicative Export Quota (MIEQ) target, whichever is lower.
Similarly, mill/distillery-wise ethanol supply target will be revised to actual quantity contracted by them for supply to Oil Marketing Companies (OMCs). In case of mills/distillery not offering supplies ethanol so far, the existing allocation already notified, will remain unchanged. Performance of ethanol supply would be assessed on the basis of actual supply made against pro-rated supply schedule fixed by OMCs till June 2016 with respect to contracted quantities.
As the production subsidy scheme was withdrawn before time, the sugar mills which have exported at least 50% of their export target (80% of MIEQ) and in case of mills having distillation capacity have supplied ethanol as per revised schedule shall be eligible for production subsidy. However, production subsidy on actual cane crushing would be provided to sugar mills proportionate to their achievement on export and ethanol supply targets with equal weightage.
Cement stocks also gained. ACC (up 0.62%), Shree Cement (up 1.07%), Ambuja Cements (up 0.17%), and UltraTech Cement (up 0.31%) gained.
Grasim Industries advanced 0.33%. Grasim has exposure to the cement sector through its holding in UltraTech Cement.
Cadila Healthcare rose 8.34% to Rs 375.95 after consolidated net profit fell 22.6% to Rs 356.20 crore on 4% decline in total income from operations to Rs 2287.10 crore in Q1 June 2016 over Q1 June 2015. Shares of Cadila Healthcare dropped ahead of Q1 results. The stock fell 5.2% in three trading sessions to settle at Rs 347 yesterday, 3 August 2016, from its close of Rs 366.05 on 29 July 2016. The decline in topline and bottom line in Q1 June 2016 was partly due to base effect. The company's top line in Q1 June 2015 was boosted by consideration of Rs 66.70 crore received by its wholly owned subsidiary Zydus Pharmaceuticals (USA) Inc. on sale and transfer of ownership interest in certain Abbreviated New Drug Applications for generic drug products.
Natco Pharma rose 4.68% after the company received final approval for Abbreviated New Drug Application from USFDA for generic versions of Tamiflu oral capsules. The announcement was made before trading hours today, 4 August 2016. Natco Pharma has received final approval for abbreviated new drug application (ANDA) containing a paragraph IV certification filed with the US Food and Drug Administration (USFDA) for generic versions of Tamiflu oral capsules, 30 mg, 45 mg and 75 mg. Natco and its marketing partner Alvogen are the first generic players to receive this approval. Tamiflu is Roche's trade name for oseltamivir phosphate. Tamiflu oral capsules had US sales of approximately $403 million for twelve months ended December 2015, according to IMS Health data.
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