Trading for the second quarter and July month started on a positive note as key benchmark indices settled with good gains as firmness in global stocks perked up sentiment. The barometer index, the S&P BSE Sensex was up 300.01 points or 0.97% at 31,221.62, as per the provisional closing data. The Nifty 50 index rose 95.40 points or 1% at 9,616.30, as per the provisional closing data.
The sentiment was also boosted after the biggest tax reform, the Goods and Services Tax came into force from 1 July 2017. The gains were supported by a sharp jump in index heavyweight ITC.
Trading for July started on a buoyant note, with indices witnessing a gap-up opening. Indices held firm later during the session.
The Sensex gained 336.72 points or 1.08% at the day's high of 31,258.33, its highest level since 27 June 2017. The index rose 95.50 points or 0.3% at the day's low of 31,017.11. The Nifty spurted 103.10 points or 1.08% at the day's high of 9,624, its highest level since 23 June 2017. The index gained 22.65 points or 0.23% at the day's low of 9,543.55.
Among other indices, the S&P BSE Mid-Cap index provisionally rose 1.13%. The S&P BSE Small-Cap index provisionally gained 1.05%. Both these indices outperformed the Sensex.
The broad market depicted strength. There were more than two gainers against every loser on BSE. 1,793 shares rose and 870 shares fell. A total of 171 shares were unchanged.
The total turnover on BSE amounted to Rs 3178.02 crore, higher than turnover of Rs 3079.94 crore registered during the previous trading session.
Metal & mining stocks gained on positive economic data in China. JSW Steel (up 0.62%), Hindustan Copper (up 1.25%), Vedanta (up 1.79%), Hindalco Industries (up 3.04%), Hindustan Zinc (up 0.7%), Jindal Steel & Power (up 4.59%), Tata Steel (up 1.06%), Steel Authority of India (Sail) (up 0.43%), and NMDC (up 4.48%) gained. Bhushan Steel (down 1.11%) and National Aluminum Company (down 0.46%) declined. China is the world's largest consumer of steel, copper and aluminum.
Index heavyweight and cigarette maker ITC jumped 6.11% to Rs 343.65 post developments around taxation on cigarettes. The Central Board of Excise and Customs (CBEC), reportedly over the weekend, removed excise and additional excise duty on cigarettes, while the National Calamity Contingent continued to remain.
As per reports, taxation for cigarettes under the new good and services tax (GST) is around 5-6% lower than the previous tax structure. Under the GST regime, cigarettes have been put in the highest tax slab of 28%. Basic excise duty and additional excise duty are repealed and only national calamity duty is continuing under the GST regime for cigarettes. ITC is the market leader in cigarettes with a share of nearly 80%, reports indicated adding that over 60% of the company's revenues come from its cigarettes business.
As per a foreign brokerage, the return of predictability in taxation could drive volume growth and opportunity to launch a lower-priced cigarette to drive growth in the organized industry. The brokerage firm has maintained a buy rating for the ITC stock and increased its target price to Rs 390 a share.
Another foreign broking firm said the ITC stock remains its top pick in the consumer sector and it maintained outperform and increased its target price to Rs 385 a share.
On macroeconomic data front, Markit Economics said during market hours today, 3 July 2017 that Purchasing Managers' Index (PMI) data highlighted a slowdown in growth across India's manufacturing sector during June. A softer rise in factory new orders resulted in weaker growth of production, with rates of expansion at four-month lows in both cases. Down from 51.6 in May to a four-month low of 50.9 in June, the Nikkei India Manufacturing PMI pointed to a slight and weaker improvement in the health of the sector.
Meanwhile, the output of eight core infrastructure industries, comprising 40.27% of the weight of items included in the Index of Industrial Production (IIP), improved 3.6% in May 2017. The cumulative output of eight core infrastructure industries moved up 3.2% in April-May 2017-18. The data was announced after market hours on Friday, 30 June 2017.
The Goods and Services Tax came into force from 1 July 2017, amid a historic midnight session in the Central Hall of Parliament on 30 June 2017. President Pranab Mukherjee, Prime Minister Narendra Modi, and Finance Minister Arun Jaitley addressed the gathering, before the President and the Prime Minister pressed a button to mark the launch of GST. The biggest tax reform since independence - GST - will pave the way for realization of the goal of One Nation - One Tax - One Market.
Overseas, European stocks edged higher buoyed by the commodities sector after upbeat manufacturing data from China and a continued rally in oil prices. Factories across the euro zone rounded off the first half of 2017 by ramping up activity at the fastest rate for over six years as rising prices failed to put a dent in orders, a survey showed. IHS Markit's Manufacturing Purchasing Managers' Index for the euro zone rose to 57.4 in June, up from May's 57 and pipping the preliminary reading of 57.3.
Most Asian stocks gained after a private gauge of China's factory activity rebounded in June. US stocks closed mixed on Friday, 30 June 2017.
On macro economic data front, a private gauge of China's factory activity rebounded in June to show an expansion, indicating an improvement in the manufacturing sector that tallied with official data released last week. The Caixin China manufacturing purchasing managers' index rose to 50.4 in June from 49.6 in May, showing a rise in activity, Caixin Media Co. and research firm Markit said. The 50 level separates an expansion in manufacturing activity from a contraction.
Japanese manufacturing activity expanded at a slightly slower pace in June. The final June Markit/Nikkei Japan Manufacturing PMI was 52.4, higher than a preliminary reading of 52 but still below a final 53.1 in May.
Japan's business confidence among the nation's large manufacturers strengthened to its highest level in more than three years in the second quarter, according to a central bank survey. The main index measuring large manufacturers' confidence rose to plus 17 in the April-June period from plus 12 previously, according to the Bank of Japan's quarterly tankan survey.
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