Benchmarks resume northward journey; trade higher in early deals

Indian equity benchmarks, resuming their northward journey, have made a gap up opening and are trading in fine fettle in early deals on the back of firm global cues. Asian shares were trading higher after China reported better-than-expected factory data. The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) recovered to 49.7 in May from April's final reading of 48.1, beating a Reuters' poll forecast of 48.1. A weaker yen also helped boost sentiment for Japanese shares. The US markets bounced back overnight following the release of the minutes of the latest Federal Reserve meeting, which did not provide any indication that an interest rate hike is imminent.

Back home, sentiments also remained up-beat after UN World Economic Situation and Prospects (WESP) 2014 mid-year update, said that India’s economy would grow by 5 percent in 2014 and 5.5 percent in 2015  on stronger consumption and investment, up from 4.8 percent in 2013 and 4.7 percent in 2012. Some support also came in from currency front as rupee firmed up against the US dollar tracking gains in equities. The currency was at Rs 58.56 compared to the previous close of Rs 58.77. Meanwhile, Jewellery makers like Titan Company, Gitanjali Gems, PC Jeweller, Thangamayil Jewellery, Tribhovandas Bhimji Zaveri edged higher after the Reserve Bank of India (RBI) eased gold import rules by allowing select trading houses, in addition to already permitted banks, to procure the precious metal to boost exports.

On the sectoral front, consumer durables, metal and realty witnessed the maximum gain in trade, while technology, software and healthcare remained the top losers on the BSE sectoral space. The broader indices were outperforming benchmarks, while the market breadth on the BSE was positive; there were 1524 shares on the gaining side against 367 shares on the losing side while 38 shares remain unchanged.

The BSE Sensex is currently trading at 24407.39, up by 109.37 points or 0.45% after trading in a range of 24434.59 and 24347.78. There were 21 stocks advancing against 9 declines on the index. The broader indices were trading in green; the BSE Mid cap index was up by 1.45% and Small cap index gained 1.68%. The top gaining sectoral indices on the BSE were, Consumer Durables up by 6.60%, Realty up by 2.12%, Metal up by 2.09%, Auto up by 1.83% and PSU up by 1.70%, while TECK down by 0.16% and IT down by 0.13%were the top losers.

The top gainers on the Sensex were Maruti Suzuki up by 5.22%, Coal India up by 4.45%, Bajaj Auto up by 2.78%, NTPC up by 2.43% and Tata Steel up by 2.29%. On the flip side, Infosys was down by  1.17%,Bharti Airtel  was down by 0.95%,Hindalco Inds  was down by 0.88% , HDFC Bank was down by 0.78% and HDFC was down by 0.54%  were the losers on the Sensex.

Meanwhile, the World Gold Council (WGC), in its latest Gold Demand Trends report, highlighted that India’s gold demand declined by 26% to 190.3 tonnes during January-March quarter of 2014 as against 257.5 tonnes in the same period of previous year due to higher import duties and supply curbs imposed by the government. In value terms, domestic gold demand stood at Rs 48,853 crore in Q12014 versus Rs 73,184 crore Q1 of 2013, representing a 33% decline.    

The report further added that total jewellery demand during the period down 9% at 145.6 tonnes compared to 159.5 tonnes Q1 of 2013. Total investment demand for Q1 2014 was down by 54% at 44.7 tonnes from 98 tonnes in the same quarter last year. However, gold continued to enter India through unofficial channels, impacting domestic gold industry. The WCG expects Indian gold demand at around 900-1,000 tonnes for 2014.

Gold is the second largest import item for India after crude oil and is mainly utilised to meet the demand of jewellery industry. The government and the Reserve Bank of India (RBI) had imposed restriction on gold imports to reduce the widening current account deficit (CAD). The curbs included higher import duty at 10 percent and linking the imports to exports with 20:80 scheme under which 20% of all gold imports by importers has to be re-exported. Meanwhile, these restrictions on gold imports have yielded results as the CAD is likely to improve at around 2% of GDP level during FY14 as against the record high of 4.8% of GDP in FY13.

However, the move has been adversely impacting the domestic jewellery exports. Indian gems and jewellery industry exports declined by 8.82% to $39.52 billion in FY14 from a year earlier. Meanwhile, there are expectations that new government will remove these short terms curbs in order to create a favorable system that deals with gold and other precious metals category.

The CNX Nifty is currently trading at 7,280.10 up by 27.20 points or 0.38% after trading in a range of 7,298.35 and 7,258.15. There were 33 stocks advancing against 17 declines on the index.

The top gainers of the Nifty were Maruti up by 5.16%, Coal India up by 4.79%, DLF up by 3.19%, Bajaj-Auto up by 2.75% and NTPC up by 2.44%. On the flip side, Infosys down by 1.40%, Ultra Cement down by 0.97%, Hindalco down by 0.88% HCL Tech down by 0.86% and HDFC Bank down by 0.74% were the top losers on the index.

Most of Asian markets were trading in green; Hang Seng up by 168.75 points or 0.74% to 23,005.27, Jakarta Composite up by 40.15 points or 0.82% to 4,950.44, Nikkei 225 increased by 276.63 points or 1.97% to 14,318.80, Straits Times surged 96.54 points or 1.09% to 8,958.96, Shanghai Composite was up by 8.30 points or 0.41% to 2,033.25, and Taiwan Weighted was up by 96.54 points or 1.09% to 8,958.96.

On the flip side, Seoul Composite dipped by 1.53 points or 0.08% to 1,875.50 and KLSE Composite decreased by 82.80 points or 0.29% to 28,760.12.