Daily Big Picture – Benchmark Indices Turn South, as Cess on Cigarettes Takes Puff out of ITC

Today’s Action:

The key indices headed lower in today’s session, led by a plunge in the ITC stock and profit-booking. Broader indices accompanied the headline indices on the way down.

Daily Market Review

The benchmark equity indices witnessed a pullback in today’s session led by a plunge in the ITC stock and profit-booking. Throughout the day, the market traded in the red, as market heavyweight ITC, which opened 10% lower, dragged the headline indices. The Q1 FY 2018 earnings season has already started, and good results will be key for the Nifty to push towards the 10,000 mark.

The Nifty opened lower today at 9,832.70. After touching an intraday high of 9,885.35, the index headed south to touch an intraday low of 9,792.05, before finally settling at 9,827.15, down 0.90% from yesterday’s closing price. The BSE Sensex, after opening lower at 31,775.54, reached an intraday high of 31,911.61. The index, however, slipped as the day progressed, and touched an intraday low of 31,626.44. The index finally settled at 31,710.99, down 1.13% from yesterday’s close.

The market breadth, indicating the overall health of the market, was tilted towards the losers, with 496 stocks advancing on the NSE, compared with 996 stocks declining, and 55 stocks remaining unchanged.

The broader indices drifted lower along with the headline indices, with the Nifty Midcap and Smallcap indices posting losses of 0.52% and 0.59%, respectively.

The MarketSmith India IND 47 Index, which lists the top 47 stocks in chart on fundamental characteristics, lost 0.73% in today’s trading session.

On the sectoral front, six sectors closed in green, while an equal number posted losses. The Nifty IT, Pharma, and Auto indices led the gainers, advancing 0.45%, 0.30%, and 0.16%, respectively. On the flip side, the Nifty FMCG, Energy, and Realty Indices lost 6.73%, 1.25%, and 1.02% respectively in today’s session.

Yesterday, the Goods and Services Tax (GST) Council announced that the cess on cigarettes will be increased. The increase has been effected from yesterday midnight, and is expected to generate about INR 5,000 crore of revenues for the government. The stock has lost 12% in today’s trade and has dragged both the headline indices lower today.

The IPO market is set to witness some marquee listings going ahead. SBI Life Insurance has filed the draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The insurer is likely to raise as much as INR 8,500-9,000 crore from the listing. Separately, the board of HDFC Life has also approved an IPO for the company. Currently, ICICI Prudential Life Insurance is the only listed life insurer in the country.

Yesterday, the Telecom Regulatory Authority of India (TRAI) announced that it plans to start in August, the public discussion on the next round of spectrum auction. It will focus on the 5G services and the premium 700 megahertz band. It may be noted that telecom operators had requested the government to go slow on the next round of spectrum auctions, as the sector is facing financial stress, and the companies will not be in a position to buy more spectrum for about the next two years.

Current Outlook:

– Market environment conducive for new purchases, but remain selective.

– Focus on fundamentally strong stocks breaking out of strong technical patterns.

– Stay disciplined and exercise sound buy and sell rules.

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