Markets extend their loss; interest rate hike fears weigh

Domestic equity markets which drifted lower after getting a cautious start in the morning trade have now extended their losses due to lack of buying activity, since lingering concerns over inflation and its fallout on interest rates has been weighing on investor's sentiment. The benchmark indices are trading in red below their crucial levels on negative global cues. As all regional counterparts, barring Taiwan Weighted have drifted lower in the trade. While, the US future indices are struggling to keep themselves in the green. Back home, broader indices too are performing in tandem with their larger counterparts. While, on the BSE sectoral front no sector is currently in the gainer list, while stock from Capital Goods, Consumer Durables, Auto, Public Sector Undertaking and Power are testing the market in a fairly rough manner. Both the barometer indices weighed down by the outflows by the Foreign Institutional investors are trading near their crucial physiological level of 19500(Sensex) and 5800 mark Nifty. The market breadth on the BSE continues to be sluggishly in the favour of declines which have thrashed advances in the ratio of 1493:1053, while, 85 shares remained unchanged.

The BSE Sensex is currently trading at 19,486.96, down by 204.85 points or 1.04%. There were 6 stocks advancing against 24 declines on the index.

Both the broader indices, BSE Small cap and BSE Midcap were down by 0.77% each.

The major losers in the BSE sectoral space were, Capital Goods down by 2.22%, Consumer Durables down by 1.75%,Auto down by 1.55%,Public Sector Undertaking down by 0.98% and Power down by 0.97%, while, there was no sector trading in green on the index.

The top gainers on the Sensex were Sterlite Industries up by 1.99%, Reliance Infra up by 1.25%, SBI up by 0.51%, Bharti Airtel up by 0.38% and Tata Power up by 0.25%.

On the other hand, HDFC down by 3.21% Wipro down by 3.04%,HDFC Bank down by 3.03%, L&T down by 2.92%, and Hero Honda down by 2.40% were the top losers on the index.

Meanwhile, the much awaited indirect tax reform, that is the launch of goods and services tax (GST) is all set to be delayed further with government and opposition showing no signs of an early consensus on the matter. With the ongoing debate on 2G scam between the two sides, finance ministry expects little cooperation from the opposition ruled states on the matter.

The finance ministry was hopeful that if a consensus can be reached with all the states, a bill on the constitutional amendments that are needed to be passed before implementation of the much awaited tax can be introduced in the Parliament in the budget session. However, with no hope for a consensus, the matter seems to have been delayed much further.  

So far the empowered committee of state finance ministers seems to be divided evenly on the matter. While the congress ruled states are willing to accept the latest proposal by the finance ministry, the opposition ruled states are arguing that GST in current form will erode the fiscal autonomy of state governments. In his Budget speech in February last year, union finance minister Pranab Mukherjee had stated his intention to implement the GST by 1 April 2011. But the impasse over constitutional amendment required before the new indirect tax regime can be applicable has already ruled out that deadline.

Since the GST is a transaction based tax, so, it is not essential for it to start at beginning of the year. It is possible for GST to be introduced it any time. A more logical point though could have been middle of the next fiscal. But, with the budget session too looking set to continue seeing the impasse on 2G scam leaving hardly any space with the government to try to form consensus with states, even that timeline is ruled out.

The purpose of the GST is to integrate all the indirect taxes on goods and services at the state and central levels including the value-added tax (VAT), excise and service taxes etc. Since the GST will bring all these taxes under one head, it will be easy to pay and collect taxes resulting in reduced cost of collection and greater compliance. It would also add greater revenue to the exchequer even as it lowers the price paid by consumers. However, its implementation now seems unlikely anytime soon. 

SARIAH 50 which opened at 1,209.70 is currently trading low by 11.53 points or 0.95% at 1,196.38 from its previous close of 1,207.91.It has touched a high of 1,209.70 and a low of 1,195.27. 

The S&P CNX Nifty is currently trading at 5,849.20, down by 55.40 points or 0.94%. There were 10 stocks advancing against 39 declines while one scrip remained unchanged on the index.

The top gainers of the Nifty were Sterlite Industries up by 2.04%, Reliance Infra up by 0.95%, Axis Bank up 0.93%,Bharti Airtel up 0.53% and Tata Power up by 0.41%.

The top losers of the index were HDFC down by 3.42%, HDFC Bank down by 3.12%,L&T down 2.78%, Kotak Bank down by 2.73%, and Hero Honda was down by 2.66%.

Asian markets were mostly trading in the red; Hang Seng was down 39.47 points or 0.17% to 23,647.16, Jakarta Composite was down by 0.13%, KLSE Composite slid 0.33%, Straits Times lost 0.54%, Seoul Composite declined 0.54%.

On the other hand Taiwan Weighted up by 0.14% was the lone gainer in the Asian pack. Stock markets in Japan remained closed today on account of a national holiday.

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