Markets snap five days losing streak; end slightly in the green

Indian equity benchmarks, snapping five days losing streak, ended the session slightly in the green. Sentiments remained up-beat on report that foreign institutional investors (FIIs) have tightened their grip on the Indian equity market. Average FII stake in 489 companies from the BSE-500 index shot up by 30 basis points to 19.9% in the quarter ended March 2014 from 19.6% as at end of December 2013 quarter. Meanwhile, FIIs bought shares worth a net Rs 386.95 crore on May 2, 2014, as per provisional data from the stock exchanges.

Markets after a tepid opening picked up pace and edged near their crucial 22,600 (Sensex) and 6,750 (Nifty) levels but investors turned cautious and booked profits at higher levels as reports suggested that the recent rally seems to have run ahead of fundamentals. The current market rally has been building up on hopes that the BJP-led NDA alliance emerging victorious in the Lok Sabha elections. Gains also remained capped on report that latest estimates worked out by the Planning Commission expects that the Indian economy’s annual average growth rate may not exceed 6 percent during the 12th Five-Year Plan (2012-17), compared with the target of 8 percent.

Global cues too remained sluggish with European markets trading lower in early deals on news of China’s troubled economic outlook and the escalation of the conflict in Ukraine. Asian markets too ended mostly in the red as sentiments were weighed down by report of a gauge of Chinese manufacturing contracting for a fourth month. HSBC/Markit gauge of China manufacturing dropped to 48.1 from a preliminary reading of 48.3.

Back home, some support came from rally in Oil & Gas counter with HPCL stocks scaling its 52 weeks high level and BPCL spurting around a percent. Banking stocks also remained on buyers’ radar after Canara Bank reported its fourth quarter earnings. The bank posted 15.79% fall in its net profit at Rs 610.83 crore for the quarter ended March 31, 2014, though stocks moved higher by over 6% after the bank said its net non-performing assets (NPA), as a percentage of total assets, declined to 1.98% in March quarter from 2.39% in the previous quarter ended December 2013. On the flip side, stocks of software pack sank after rupee appreciated for fourth consecutive session and strengthened near 60/$ level, in intra-day trade on Monday.

The NSE’s 50-share broadly followed index Nifty rose marginally to end just shy of 6,700 mark, while Bombay Stock Exchange’s Sensitive Index -- Sensex gained by over forty points to end near the psychological 22,450 mark. Broader markets, however, struggled to get any traction throughout the session and ended the trade in negative terrain. The market breadth remained in favour of decliners, as there were 1,254 shares on the gaining side against 1,493 shares on the losing side while 124 shares remained unchanged.

Finally, the BSE Sensex gained 41.23 points or 0.18%, to 22445.12, while the CNX Nifty was up by 4.55 points or 0.07% to 6,699.35.

The BSE Sensex touched a high and a low of 22592.03 and 22354.45, respectively. The BSE Mid cap index was down by 0.13%, while the Small cap index lost 0.46%.

The top gainers on the Sensex were Hindalco Inds up by 4.80%, ONGC up by 1.93%, RIL up by 1.82%, Tata Steel up by 1.68% and L&T up by 1.62%. While HDFC down by 2.30%, Cipla down by 2.14%, Tata Power down by 1.56%, Bharti Airtel down by 1.41% and Infosys down by 1.36% were the top losers in the index.

On the BSE Sectoral front, Oil & Gas up by 1.53%, Metal up by 1.21%, Capital Goods up by 0.91%, PSU up by 0.65% and FMCG up by 0.50% were the top gainers, while Teck down by 1.16%, IT down by 0.96%, Realty down by 0.75%, Healthcare down by 0.72% and Power down by 0.47% were the top losers in the space.

Meanwhile, the Confederation of Indian Industry (CII) has suggested 5-point action plan to deal with the issue of rising non-performing assets (NPAs) of Indian banks. The CII’s report, recently submitted to Finance Ministry and the Reserve Bank recommended 5 steps, such as setting up a National Asset Management Company, revamping the corporate debt restructuring (CDR) mechanism, creating a special resolution mechanism for the infrastructure sector, liberalising norms to raise capitalisation of asset reconstruction companies and improving the effectiveness of the insolvency regime.

Expressing concerns over the deteriorating asset quality of banks, the industry body highlighted that stressed loans in India such as bad and restructured loans crossed 10 percent of all loans in mid 2013-14 and expected to increase 15 percent by the end of 2014-15. Prevailing economic slowdown accompanied with high interest rates in order to tame the inflation has led to a sharp deterioration in asset quality for the banking sector. Owing to their impaired portfolios, the banks are now cautious to extend credit which is impacting the growth in the corporate sector. The CII also recommended measures to reduce the recovery time in Debt Recovery Tribunal (DRT) so that delays could be minimized and remedial measures can be taken.

The Industry chamber added that effective implementation of these measures would release significant stress from the Indian banking system and would yield positive result in making the domestic banking sector more robust.

Indian banking industry is the most dominant segment of the country’s financial sector and plays an important role in the economic development of the country. Banks help to boost economic growth by allocating savings to investments that have potential to yield higher returns.

The CNX Nifty touched a high and low of 6,741.05 and 6,680.45 respectively.

The top gainers of the Nifty were Hindalco Industries up by 5.13%, Jindal Steel & Power up by 2.01%, Tata Steel up by 1.77%, Reliance Industries up by 1.76% and ONGC up by 1.73%. On the other hand, HCL Technologies down by 3.21%, HDFC down by 2.64%, Cipla down by 2.23%, Tata Power Company down by 1.93% and NMDC down by 1.84% were the top losers.

The European markets were trading in red, France's CAC 40 was down by 1.10% and Germany's DAX was down by 1.36%, while UK’s market was closed on account of Early May Bank Holiday.

The Asian markets concluded Monday’s trade on mixed note, after a closely watched survey indicated manufacturing activity in China slowed more than first thought in April, while the simmering conflict in Ukraine also weighed on the sentiment. Japanese and South Korean markets were shut for trade on account of ‘Children’s Day’ holiday. China’s manufacturing sector contracted for a fourth consecutive month in April, the latest sign that the world’s second-largest economy is slowing. The HSBC purchasing managers index (PMI) came in at 48.1 for last month, a tad up from 48.0 in March but weaker than the 48.3 reported in its preliminary report on April 23. Indonesia’s economy grew at a much slower than expected pace in the first quarter as investments and exports weakened. Gross Domestic Product (GDP) in the January to March quarter rose 5.21% from a year earlier, against 5.72% in the fourth quarter. On a quarterly basis, the economy expanded 0.95%.

In Hong Kong, the total retail sales value in March, provisionally estimated at $39.6 billion, fell 1.3% over the same month last year. The revised estimate of the combined total retail sales value in the first two months rose 6.7% year-on-year, while that of the first quarter increased 4.2%. Separately, the Inland Revenue Department received $243.5 billion in tax revenue in 2013-14, setting another record high after the 2012-13 collection year.