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Sensex Ends 636 Points Higher; Auto and Energy Stocks Witness Huge Buying
Thu, 8 Aug Closing | Monish Vora, TM Team

Indian share markets witnessed huge buying interest during closing hours today and ended their trading session in the green. Most of the gains were seen after media reports suggested that the government is likely to roll back recently-imposed higher tax on foreign portfolio investors (FPIs).

On the sectoral front, gains were seen in the auto sector and energy sector.

At the closing bell, the BSE Sensex stood higher by 636 points (up 1.7%) and the NSE Nifty closed higher by 176 points (up 1.6%).

The BSE Mid Cap index ended up by 0.4%, while the BSE Small Cap index ended the day up by 0.7%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng stood up by 0.48% and the Nikkei was trading up by 0.37%, while the Shanghai Composite was trading up by 0.93%.



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European markets were also trading on a positive note. The FTSE 100 was up by 0.13%. The DAX was trading up by 0.74%, while the CAC 40 was up by 1.14%.

The rupee was trading at 70.65 to the US$ at the time of writing.

In the news from the macroeconomic space, the Indian government is likely to withdraw higher surcharge for FPIs via notification or ordinance.

In case the government opts for ordinance, Parliament nod will be taken for the amendment in the next session.

The above move comes as the government is looking to address issues relating to FPI tax concerns.

Note that the government's proposal to increase taxes on those with annual incomes of more than Rs 20 million has rattled many foreign portfolio investors.

There's been a heavy sell-off in the Indian stock markets following the Union Budget 2019 and the biggest sellers in the ongoing correction are foreign investors.

Why are foreign investors dumping Indian stocks?

Ankit Shah answers this question in one of the editions of The 5 Minute WrapUp. Here's an excerpt of what he wrote...

  • One of the main reasons is the higher tax burden on the super-rich in the form of additional surcharge.

    All individuals and association of persons (AOPs) come under the purvey of this additional surcharge.

    Why does this bother foreign investors?

    Here's the thing - several foreign portfolio investors (FPIs) are structured as AOPs, limited liability partnerships and trusts.

    As such, if they earn over Rs 2 crore a year, they will be subjected to the higher tax surcharge.

Due to the above development, FPIs have been on a selling spree during the last month. Have a look at the chart below that shows the net monthly flows of foreign investors in the Indian stock markets:

Foreign Investors Turn Net Sellers After Five Months of Buying

Foreign Investors Turn Net Sellers After Five Months of Buying

One must also see the sell-off in the larger context - foreign investors have been net buyers of Indian equities in 2019.

Since the start of the year, their net investment in Indian equities is worth Rs 719 billion. They have been net buyers in five out of seven months.

So, the ongoing sell-off should not be seen as foreign investors exiting India for good. They will come back when the valuations get more attractive to compensate for the higher tax burden.

So, look out for the stocks that will rise fast when the tide of the market turns up.

We will keep you updated on all the developments from this space. Stay tuned.

In the news from the FMCG sector, Emami share price was in focus today as the company reported 47.8% year-on-year (YoY) increase in consolidated net profit at Rs 391 million for June quarter 2019-20.

Net sales were up by 5.5% YoY at Rs 6,486 million during the quarter.

Earnings before interest tax depreciation and amortization (EBITDA) grew 11% YoY and the EBITDA margin stood at 20.7% in Q1 June 2019.

The company witnessed challenges during the quarter in terms of adverse economic conditions such as channel liquidity issues and muted rural incomes which coupled with a high base in Q1 June 2018 impacted growth levels in the domestic business.

During the quarter, both Kesh King and 7 Oils continued to post robust growth. Navratna grew satisfactorily. However, muted performance of pain management, male grooming, BoroPlus and healthcare range led to lower growth in the domestic business.

While key brands like Navratna, Zandu & MenthoPlus balms, Kesh King and BoroPlus continued to gain market shares, Fair and Handsome maintained its leadership.

International Business grew by 34% during the quarter led by a strong performance in SAARC and MENAP regions.

Commenting on the quarterly performance Mohan Goenka, Director, Emami said the macroeconomic environment continues to be challenging, with a distinct slowdown in the consumer demand curve particularly for discretionary products. Despite such challenges, the company is satisfied with the performance of Kesh King, Navratna, 7 Oils in One and international business this quarter.

He added that with the stabilization of raw material prices and the government impetus to put rural growth on the fast track, the company expects business to bounce back in the coming quarters.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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