EQUITIES START SEPTEMBER WITH CUTS; MAT RELIEF FOR FIIs AT HOME

EQUITIES START SEPTEMBER WITH CUTS; MAT RELIEF FOR FIIs AT HOME

WORLD MARKETS                             

US indices plunged nearly 3% yesterday as continued signs of weakness in China and concerns about the Federal Reserve weighed heavily on sentiment.

Two sets of key Chinese data disappointed markets yesterday. The official manufacturing purchasing managers' index (PMI) edged down to 49.7 in August from 50 in July, while the final Caixin/Markit manufacturing PMI came in at 47.3 in August, the lowest reading since March 2009.

Nymex oil fell $3.79 or 7.7% to $45.41 a barrel, giving back much of Monday's 8.8% surge.

Back in the US, August ISM manufacturing index fell to 51.1 from 52.7 the prior month for its weakest read in over two years. Construction spending increased 0.7% in July.

European markets fell 2.2%-3%.

Earlier, Nikkei ended lower by about 4%.

AT HOME

After opening about eight tenth of a percent down, benchmark indices plunged another percent and half from the opening level to end with deep cuts of 2.3% and closing at the lowest level since October 2014. Sensex nosedived 587 points to settle at 25696 while Nifty finished at 7786, down 185 points. BSE mid-cap and small-cap indices lost 2% and 2.2% respectively. All the BSE sectoral indices ended in red with Bankex and Metal indices leading the tally, down 3.6% and 3.2% respectively.

FIIs net bought stocks, index futures and stock futures worth Rs 675 cr, 698 cr and 192 cr respectively. DIIs were net buyers to the tune of Rs 682 cr.

Rupee appreciated 26 paise to end at 66.21/$.

India’s Nikkei Purchasing Managers’ Index (PMI) for the manufacturing sector for August came in at 52.3, lower than July’s 52.7 reading.

Maruti reported 6.5% y-o-y rise in August sales at 1.18 lakh units. Eicher reported 59% growth at 42360 units. Ashok Leyland reported 39% growth at 11544 units. M & M reported 5.7% dip at 47333 units.

In a relief to foreign investors, the government yesterday said that it has decided to go by the opinion of an expert panel that said that minimum alternate tax (MAT) was never applicable to the trading gains of foreign institutional investors (FIIs/FPIs). The government added that tax officers would soon write to all the firms that have received MAT notices that the orders won’t be pursued. Whenever Parliament convenes next, the relevant Section 115JB of the Income Tax Act would be amended to stress the complete inapplicability of MAT provisions to FIIs/FPIs.

OUTLOOK

Today morning, except a modestly higher Nikkei, other Asian markets are trading in red. SGX Nifty is suggesting a flattish start for our market.

In yesterday's report we had mentioned that a sustained trading below 7910 would generate a sell on the hourly chart and would open up the space for the further downside till about 7830, which is the 61.8% retracement level of the recent 7667-8092 upmove. We had also advised exiting trading longs if Nifty breaks the low made in first hour.

The benchmark broke the 7910 support in the initial trade itself and plunged all the way to 7746 before closing at 7786.

7667, the panic bottom made on 25th August, is the next major support to eye on the way down. Immediate resistance on the hourly chart is placed around 7935.

In light of the wild moves that we have been witnessing over past couple of days, traders would do well to keep trading volumes low and let the benchmark settle down before taking a fresh view.