LETHARGIC TRADE

The key equity indices remained lethargic in trade as below average corporate earnings along with high inflation and fear of further rate hike by RBI are hurting the investor's sentiments. As far as global markets are concerned, the Asian markets were trading mixed, while US index futures were showing down tick in screen trade today. Back home, among the sectoral indices, oil & gas, fast moving consumer goods, information technology and auto are trading higher; while realty, capital goods, power, healthcare and metal stocks are drifting down to lower levels due to lack of support. Broader indices are also under pressure, with the BSE Mid cap and Small cap indices declining 0.46% and 0.25%, respectively. The market breadth on the BSE was in favour of declines in the ratio of 1307:966 while 134 scrips remained unchanged. Meanwhile, index heavyweight, RIL has approached the Securities and Exchange Board of India (SEBI) for the third time, seeking an out-of-court settlement to charges of insider trading.

The BSE Sensex advanced 21.51 points or 0.12% at 18,107.71. The index has touched a high of 18,198.45 and a low of 18,057.82, respectively.

The BSE Mid cap and Small cap indices lost 0.46% and 0.25%, respectively.

The top gainers in the BSE sectoral space were Oil & Gas up 0.84%, FMCG up 0.83%, IT up 0.48%, TECk up 0.26% and Auto up 0.18%. 

On the flip side, Realty down 1.46%, Capital Goods (CG) down 0.80%, Power down 0.71%, Healthcare (HC) down 0.47% and Metal down 0.39% were the major losers in the BSE sectoral space.

The top gainers of the Sensex were ITC up 1.46%, TCS up 1.42%, M&M up 1.34%, RIL up 1.13% and Bajaj Auto up 0.84%.

On the flip side, RCom down 2.56%, Tata Power down 2.38%, Hero Honda down 1.94%, DLF down 1.81% and Rel Infra down 1.38% were the major losers on the index.

Meanwhile, the Indian Government has decided to withdraw the Duty Entitlement Pass Book (DEPB) scheme for exporters on 30th June. The Ministry of Finance believes that the Indian Export Industry is performing well and now it doesn't need this incentive. The revenue department too was opposed for another lifeline for the 14-yearold scheme. Apart from citing large leakages, the revenue department has repeatedly cited the scheme's incompatibility with the World Trade Organization guidelines to argue for its discontinuation.

The Disinvestment Secretary Sunil Mitra said "the government faced an estimated annual loss of Rs 80 billion ($1.77 billion) from the DEPB, which began in 1997.

Duty Entitlement Pass Book Scheme is an export incentive scheme, notified on April 1, 1997, the DEPB Scheme consisted of (a) Post-export DEPB and (b) Pre-export DEPB. Though, the pre-export DEPB scheme was abolished with effect from April 1, 2000 the post scheme continued. Under the post DEPB scheme government reimburses about $1.77 billion a year to exporters on paid taxes on imported supplies. Exporters get refunds of duties on import content of their export products under which they have been given several extensions. DEPB is the fifth most popular tax neutralization scheme with total benefits estimated at over Rs 8,500 crore in 2010-11.The scheme is the most popular among exporters, particularly in the engineering and automobiles sectors. However the tax refund mechanism was considered to be non-compliant with the World Trade Organization rules.

Though in the past, the commerce ministry had said that it was working on a revised scheme, it has failed to put in place the new mechanism. Hence the finance ministry has little choice as it had failed to roll out the much awaited goods & services tax (GST) regime. Industrial bodies and experts feel the withdrawal of the tax incentive scheme will make Indian exporters uncompetitive in international markets, Indian exporters would require time an capital to develop new products, marketing strategies and refocus on emerging markets to sustain exports at present pace. Federation of Indian Export Organizations said the policies adopted by the government would result in overall exports falling below the $200 billion mark compared to nearly $250 billion in 2010-11.

As per the Ramu Deora, President of the Federation of Indian Export Organizations (FIEO), "If government reimbursed taxes under the drawback schemes, then the Indian exporters will get some relief".

The S&P CNX Nifty added 4.15 points or 0.08% at 5424.75.  The index has touched a high and a low of 5452.60 and 5411.25, respectively.

The top gainers of the Nifty were GAIL up 2.89%, IDFC up 1.82%, ITC up 1.43%, TCS up 1.16% and M&M up 1.15%.

On the flip side, RCom down 2.56%, Tata Power down 2.43%, Hero Honda down 2.26%, PNB down 2.04% and DLF down 1.98% were the major losers on the index.

Rest of the Asian markets were trading mixed. Hang Seng climbed 0.31%, Jakarta Composite soared 0.42%, KLSE Composite gained 0.23% and Straits Times advanced 0.76%; while Shanghai Composite dipped 0.30%, Nikkei 225 dropped 0.59%, Seoul Composite plunged 1.88% and Taiwan Weighted shed 0.58%.