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Indian equity benchmarks snapped their 6-day winning run and ended lower by over half percent on Monday dragged by Auto, Energy and Telecom shares. Markets made a weak start and stayed in red for whole day, as traders got anxious with a private report that Indian rupee may further depreciate to 82 to a dollar in the near term due to widening of trade deficit and expected aggressive rate hike by the US Fed later this week to tame record high inflation. The mood on the street remained cautious with India Ratings’ report stated that the banks are unlikely to take a big hit on profitability this quarter due to rising bond yields, which may eat up 5.3 per cent (Rs 11,790 crore) of their net income in the worst-case scenario. It also said that in the worst-case scenario, banks may see a profit erosion of 2.6 per cent of their pre-provisioning operating profit and 5.3 per cent of their post-tax profit from treasury losses in Q1.

However, key indices managed to trim some losses in late afternoon deals, taking support from Finance Minister Nirmala Sitharaman’s statement that the trust-based taxation system introduced by the government has resulted in improved collections and increase in the number of return filings. Traders took note of Reserve Bank of India Governor Shaktikanta Das’ statement that the central bank will ensure that the economy has a soft landing wherein inflation is closer to 4 per cent, with minimal impact on growth. But, markets failed to hold recovery and ended lower, as India's foreign exchange (forex) reserves slumped by $7.541 billion to $572.712 billion for the week ended July 15, the lowest level in 20 months, as the Reserve Bank of India (RBI) likely used its war chest to defend the rupee, which recently dipped below 80 against a dollar. This is the second consecutive week of the sharp drop in the country's forex reserves. Some concern also came as the government is not considering extending the last date for filing income tax returns as it expects most returns to come in by the due date of July 31. Revenue Secretary Tarun Bajaj said over 2.3 crore income returns were filed by July 20 for fiscal 2021-22 and the numbers are picking up.

On the global front, European markets were trading higher even as German business morale fell more than expected in July and a slew of downbeat earnings underlined rising worries about a hit to economic growth. Asian markets settled mostly lower on Monday after a retreat on Wall Street spurred by disappointing economic data and corporate earnings. Investors are awaiting the next move by the US Federal Reserve, which is expected to raise its key interest rate again on Wednesday as it strives to beat back inflation.

Back home, sugar industry stocks were in focus as Indian Sugar Mills Association (ISMA) in its latest report stated that India’s sugar production may fall slightly to 355 lakh tonnes in the 2022-23 marketing year starting October, due to diversion of sugarcane towards ethanol manufacturing. There were some reaction in fertilizer industry stocks with a private report that the government may revise the budget estimate (BE) for fertiliser subsidy in the current fiscal year by around 140% to Rs 2.5 trillion, as elevated global prices of fertilisers and natural gas, the key feedstock, have inflated costs.

Finally, the BSE Sensex fell 306.01 points or 0.55% to 55,766.22 and the CNX Nifty was down by 88.45 points or 0.53% to 16,631.00. 

The BSE Sensex touched high and low of 56,018.09 and 55,537.08, respectively. There were 13 stocks advancing against 17 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index rose 0.03%, while Small cap index was down by 0.13%.

The top gaining sectoral indices on the BSE were Metal up by 1.50%, Capital Goods up by 0.51%, Basic Materials up by 0.46%, Industrials up by 0.29% and PSU up by 0.18%, while Auto down by 1.69%, Energy down by 1.32%, Telecom down by 0.96%, Oil & Gas down by 0.86% and Healthcare down by 0.71% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 2.66%, Indusind Bank up by 1.99%, Asian Paints up by 1.25%, HCL Technologies up by 0.96% and Wipro up by 0.94%. On the flip side, Mahindra & Mahindra down by 3.80%, Reliance Industries down by 3.31%, Maruti Suzuki down by 2.41%, Kotak Mahindra Bank down by 1.74% and Ultratech Cement down by 1.29% were the top losers.

Meanwhile, expressing optimism over tax collection, Finance Minister Nirmala Sitharaman has said that the trust-based taxation system introduced by the government has resulted in improved collections and increase in the number of return filings. She also complimented the department for achieving the highest-ever revenue collection of over Rs 14 lakh crore in the last fiscal and expressed hope that the momentum would continue in the current fiscal too. Direct tax collections surged to Rs 14.09 lakh crore in 2021-22, registering a year-on-year growth of 49.02 per cent on the back of strong growth in mop-up from individual and corporation tax. For the current fiscal, the government has projected the direct tax collection at Rs 14.20 lakh crore.

The minister said the government has addressed several legacy issues and removed structural deficiencies related to direct taxes with a view to foster ease of living and ease of doing business. The reforms introduced by the government in recent years have ensured a trust-based tax system. She said ‘the taxpayers on their part have vindicated this trust-based approach as evident from the trend of improved tax collections and increase in the number of income tax returns filed’.

On the administration side, she said an effective use of technology has been made to enhance taxpayer services, minimise discretion in decision making and improve transparency, fairness and speed of departmental processes. She said the Income Tax Department must be appreciated for having successfully implemented the policy of reforms introduced over the last few years and for having effectively reoriented itself as a taxpayer-centric organisation. The finance minister also urged Income Tax Department to prepare itself for the next 25 years of growth.

The CNX Nifty traded in a range of 16,706.05 and 16,564.25. There were 18 stocks advancing against 31 stocks declining, while 1 stock remained unchanged on the index.

The top gainers on Nifty were Tata Steel up by 3.06%, Indusind Bank up by 1.94%, Coal India up by 1.73%, Hindalco up by 1.53% and Apollo Hospital up by 1.57%. On the flip side, Mahindra & Mahindra down by 3.99%, Reliance Industries down by 3.42%, Maruti Suzuki down by 2.50%, Eicher Motors down by 2.21% and ONGC down by 2.00% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 23.85 points or 0.33% to 7,300.22, France’s CAC increased 32.51 points or 0.52% to 6,249.33 and Germany’s DAX increased 60.71 points or 0.46% to 13,314.39.

Asian markets settled mostly lower on Monday tracking negative closing of Wall Street on Friday trade following dismal earnings updates from Twitter and Snap. Investors are also awaiting this week’s policy decision from the US Federal Reserve, as well as earnings from Google's parent company Alphabet and technology titan Apple for additional clues on the US economic outlook. Moreover, recession fears following weak business activity data from Europe and the United States also weighed on Asian market sentiments. Chinese shares declined with anxiety about China's property market as many homebuyers stopped mortgage payments. The world's most indebted developer China Evergrande Group is expected to announce a debt restructuring plan this week, that would indicate how Beijing plans to overcome a deepening property sector crisis.

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