Benchmarks snap four days winning streak; Midcap shines

Indian equity benchmarks, snapping four days winning streak, ended the session slightly in the red, as investors took profits off the table in cyclicals such as heavyweight banks and capital goods stocks. Earlier, markets after a flat but positive start, entered into negative terrain tailing weak global cues and extended their southward journey to breach the crucial 24,200 (Sensex) and 7,220 (Nifty) levels on report that foreign institutional investors (FIIs) sold shares worth a net Rs 104.53 crore on May 20, 2014, as per provisional data from the stock exchanges. Sentiments also got dampened after the Indian Institute of Tropical Meteorology’s (IITM) first experimental real-time monsoon forecast for this year predicted delayed monsoon.

However, bargain hunting in blue chip stocks helped markets to trim some of their initial losses. Some solace also came after National Council of Applied Economic Research (NCAER) in its latest release said that the business confidence in last quarter of 2013-14 improved further on expectations of a new electoral mandate that influenced the overall sentiments. The BCI in March quarter rose by about 3.8 per cent from the previous quarter to 127 points.

Global cues too remained sluggish with European counters trading largely in the red in early deals as investors were holding back from major moves ahead of the release of minutes from recent policy meetings by the US Federal Reserve and Bank of England. Most of the Asian equity indices ended in the negative terrain. The yen move and the Bank of Japan’s decision to refrain from extra stimulus to counter weaker demand following a sales tax hike pulled the Japanese Nikkei 0.20% lower.

Back home, depreciation in Indian rupee too dampened the sentiments. The rupee was trading at 58.74/75 at the time of equity markets closing versus its close of 58.63/64 on May 20, as state-owned banks bought dollars on behalf of importers. Selling in capital goods and banking counters remained the major losers on BSE sectoral front. Moreover, stocks of oil marketing companies like HPCL and IOC edged lower after Crude oil futures extended their gains on May 20, ending higher for a third straight session on growing concerns of possible supply disruptions from Russia amid the prevailing geopolitical tensions in Ukraine.

On the flip side, depreciating rupee augured well for software companies as over 80% of their revenues come from exports to the US. Stocks like Infosys, TCS, HCL Technologies, Mindtree all edged higher. Additionally, shares of fertilizer companies like Coromandel International, Rashtriya Chemicals and Fertilisers (RCF), Fertilizers and Chemicals Travancore (FACT), National Fertilisers and Deepak Fertilisers rallied by up to 15% in otherwise weak market on back of heavy volumes.

The NSE’s 50-share broadly followed index Nifty slipped over twenty points but held  its psychological 7,250 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by around eighty points to end tad below the psychological 24,300 mark. The broader markets, however, outperformed benchmarks and traded jubilantly throughout the session, ending the trade by around one and a half percent. The market breadth remained in favour of advances, as there were 2,081 shares on the gaining side against 883 shares on the losing side while 85 shares remain unchanged.

Finally, the BSE Sensex declined by 78.86 points or 0.32%, to 24298.02, while the CNX Nifty was down by 22.60 points or 0.31%, to 7,252.90.

The BSE Sensex touched a high and a low of 24419.54 and 24156.47, respectively. The BSE Mid cap index was up by 1.34%, while the Small cap index rose by 1.84%.

The top gainers on the Sensex were Bajaj Auto up by 4.69%, Hindalco Inds up by 2.54%, NTPC up by 2.21%, SSLT up by 1.51% and Coal India up by 1.49%. While SBI down by 2.61%, BHEL down by 2.39%, Axis Bank down 2.18%, L&T down by 2.11% and Bharti Airtel down by 2.03% were the top losers in the index.

On the BSE Sectoral front, Realty up by 1.90%, IT up by 0.79%, FMCG up by 0.64%, Auto up by 0.50% and Teck up by 0.44% were the top gainers, while Capital Goods down by 1.63%, Bankex down by 1.07%, Consumer Durables down by 0.42%, Healthcare down by 0.35% and Oil & Gas down by 0.26% were the top losers in the space.

Meanwhile, in yet another encouraging development for the country, Morgan Stanley has come up with a report, wherein it has described election results as an 'inflexion point' for India’s story and forecasted the likelihood of country’s gross domestic product (GDP) accelerating to 6.8% over the next two years.

The world's largest diversified financial services company, Morgan Stanley also exuberated confidence for the country emerging from the stagflation type of environment over the next few quarters and its GDP speeding up to by 210 bps over the next 8 quarters to 6.8%. While, on the inflation front, the report pointed that inflation will finally head towards RBI’s comfort zone of 6% over the next two years. It also forecasted an overshoot in equity markets on prevailing sanguine mood witnessed after the landslide victory of BJP led government and upped the 30-share index target of 26,300 for June, 2015 compared to its previous target of 21,280. In a word of caution, financial services company highlighted that it expected weaker global growth and slower than anticipated pace of policy reforms as a risk factor to its forecasts. As per the report, some of the near term challenges for the Indian economy in the next 12 months include El Nino and pace of recovery of exports, while some of the medium term challenges for the economy are global environment and reform momentum.

The CNX Nifty touched a high and low of 7,287.15 and 7,206.70 respectively.

The top gainers of the Nifty were DLF up by 5.56%, Bajaj Auto up by 5.12%, United Spirits up by 4.99%, Asian Paints up by 3.78% and NTPC up by 2.85%. On the other hand, UltraTech Cement down by 3.56%, BHEL down by 3.06%, Bharti Airtel down by 3.04%, Grasim Industries down by 2.89% and State Bank of India down by 2.50% were the top losers.

Most of the European markets were trading in red, France's CAC 40 was down by 0.04% and United Kingdom's FTSE 100 was down by 0.11%, while Germany's DAX was up by 0.18%.

The Asian markets concluded Wednesday’s trade mostly in red, with Hong Kong shares ending flat. The Bank of Japan unanimously voted to keep the current monetary base target at the conclusion of a two-day board meeting. The Bank of Japan will conduct money market operations so that the monetary base will increase at an annual pace of about 60 to 70 trillion yen. The BoJ also maintained its outlook, repeating, Japan’s economy is expected to continue a moderate recovery as a trend, while it will be affected by the subsequent decline in demand following the front-loaded increase prior to the consumption tax hike. Japan’s trade balance rose to a seasonally adjusted -0.84T, from -1.63T in the preceding month whose figure was revised up from -1.71T. Indonesia’s government forecast a widening budget deficit next year on rising fuel subsidies, which could pose a problem for the new president amidst a global economic slowdown. The fiscal deficit in 2015 will remain expansive but measured which will translate into a budget deficit in range of 1.7% to 2.5% of GDP.

Singapore’s economy will experience modest expansion this year as a tight labor market constrains some industries amid improving global demand, the government stated after growth exceeded initial estimates last quarter. The city state maintained its 2014 growth and export forecasts even as manufacturing gains helped gross domestic product rise an annualized 2.3% in the three months through March from the previous quarter, more than an April estimate of a 0.1% expansion.