The week gone by commenced on weak footing plagued by negative news flows such as ongoing tussle in Tata group, fear of an economic slow down for a lengthier period, etc. Nifty index eventually lost close to 1.91% on week-on-basis closing at 7986. Mid-cap index lost 3.78% and small-cap index was down 3.35%. Almost all the sectoral indices ended in negative zone for the week.
Foreign institutional investors continued their selling spree while domestic institutional investors bought the correction. Stock specific Engineers India hit its 52-week high while Apollo Hospital, Blue Dart, Divi’s Lab, Jubilant Food, Just Dial hit their 52- week lows. Cipla says Sereflo gets final approval from UK MHRA – Cipla Ltd, has yielded a final approval for its lead MDI product Fluticasone + Salmeterol (Sereflo™) from UK MHRA for its partner in the UK. Tata Steel to acquire 100% of Brahmani River Pellets.
On the macro front, the goods and services tax (GST) Council finalized compensation rules. Panel of finance ministers agreed on rules for compensating states after implementation of the GST.
The recent announcement by Prime Minister Narendra Modi regarding fair contribution towards taxes from financial markets for nation building, is a huge setback for equity-asset class in short run. It adds to compounding of woes emanating from policy uncertainty. Now, till the time upcoming budget’s fineprint is out, upside for equities is capped. PM Modi has been very clear on raising contribution of taxes from financial markets which is presently low due to the existing tax structure. Implying capital gain, tax rates on both short and long term may be raised in upcoming budget. The aforesaid announcement will induce heavy selling pressure in markets. Nifty is likely to test 7600-7700 levels in the ensuing week.
The writer is head-retail research, Motilal Oswal Securities Ltd