Benchmarks end slightly in the red ahead of Q4 GDP data

Extending their southward journey for second day in a row, Indian equity indices ended the session slightly in the red on Friday, as investors preferred to remain on sidelines ahead of Q4 GDP data, scheduled to be released later in the day. Moreover, investors were also eying RBI policy review next week, wherein Raghuram Rajan is most likely to keep monetary policy rates steady, given continued concerns about inflation. Frontline gauges moved in a narrow range for the major part of the day with bouts of volatility witnessed during the trade. Earlier, markets made a positive start tracking positive global cues from US markets but sentiments turned cautious on report that foreign institutional investors (FIIs) sold shares worth a net Rs 522.90 crore on May 29, 2014, as per provisional data from the stock exchanges.

Moreover, disappointing cues from European market too dampened investors' sentiments. CAC, DAX and FTSE all made a sluggish start on report that Germany’s retail sales fell 0.9% in April, confounding hopes for a rise of 0.4%. Asian markets reversing all on their initial gains ended mostly in the red as investors opted to book profit ahead of European Central Bank’s meeting next week.

Back home, Reserve Bank of India (RBI) Governor Raghuram Rajan said he expected to join hands with the country’s new government to bring down dangerously high inflation. Rajan, speaking at a seminar in Tokyo, said the new government’s plan to curb food inflation seems sensible and that he expects the public’s inflation expectations to fall in the future. On the currency front, the rupee was trading little changed at 59.01/02 at the time of equity markets closing versus its previous close of 59.03/04, as good dollar selling from the share sale of Yes Bank was offset by heavy demand from importers to meet month-end import commitments.

Meanwhile, the rate-sensitive Banking counter witnessed selling ahead of the credit policy next week. On the flip side, shares of Defense Equipment and Manufacturers viz. Pipavav Defence and Offshore Engineering, BEML and Bharat Electronics all edged higher after media reports said that the government is likely to hike foreign direct investment in the defense sector from 26% to 100%. Additionally, Rail-related shares too remained on buyers’ radar on reports that the government is likely to announce foreign direct investment policy for railways soon.

The NSE’s 50-share broadly followed index Nifty declined by over five points, but held its psychological 7,200 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over fifteen points but managed to hold its head above crucial 24,250 mark. However, the broader markets outperformed benchmarks and ended the session with a gain of around half a percent. The market breadth remained in favour of advances, as there were 1,585 shares on the gaining side against 1,397 shares on the losing side while 122 shares remain unchanged.

Finally, the BSE Sensex declined by 16.81 points or 0.07%, to 24217.34, while the CNX Nifty was down by 5.70 points or 0.08%, to 7,229.95.

The BSE Sensex touched a high and a low of 24353.59 and 24163.62, respectively. The BSE Mid cap index was up by 0.39%, while the Small cap index rose by 0.34%.

The top gainers on the Sensex were Hindustan Unilever up by 7.87%, NTPC up by 4.99%, Mahindra & Mahindra up by 4.43%, Sun Pharma up by 3.37% and Cipla up by 3.00%. While SBI down by 2.24%, HDFC Bank down by 2.03%, Tata Motors down by 1.97%, HDFC down by 1.93% and Maruti Suzuki down by 1.59% were the top losers in the index.

On the BSE Sectoral front, Healthcare up by 2.59%, Realty up by 2.00%, FMCG up by 1.34%, Power up by 0.78% and Teck up by 0.52% were the top gainers, while Consumer Durables down by 1.78%, Bankex down by 1.59%, PSU down by 0.53% and Oil & Gas down by 0.14% were the losers in the space.

Meanwhile, with an aim to cut fuel subsidy bill, Oil Ministry has stated that the monthly diesel price hikes of 40-50 paise a litre are likely to continue till under-recoveries (losses) on diesel are completely wiped out.

Earlier, in January 2013, the Cabinet had decided to increase diesel prices in small proportion monthly, until the difference between the retail price and the cost of production is bridged. Since the Cabinet move last year, diesel prices had raised by a cumulative Rs 8.33 a litre in 14 installments.

Presently, state-owned oil companies such as Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp currently lose Rs 4.41 on every litre of the fuel sold. However, under-recoveries on diesel for companies have been on a declining trend over the past one year due to monthly increase in diesel prices and appreciation in rupee value. If the Indian rupee appreciated to 56 to a dollar, all the losses will be wiped out and the diesel will be automatically deregulated. Oil Ministry had also stated that the oil subsidy burden for new government will be the lowest since 2011-12. It expects that under-recoveries on sensitive petroleum products would fall 20 percent from Rs 1,39,869 crore during FY14 to Rs 1,11,000 crore in FY15.  The Ministry’s calculations are based on the crude oil prices at $105-108 a barrel and the rupee at about 58/dollar.

The CNX Nifty touched a high and low of 7,272.50 and 7,118.45 respectively.

The top gainers of the Nifty were Hindustan Unilever up by 7.34%, NTPC up by 5.82%, Mahindra & Mahindra up by 4.77%, Sun Pharmaceuticals Industries up by 3.73% and Tata Power Company up by 3.12%. On the other hand, Bank of Baroda down by 4.20%, BPCL down by 3.20%, State Bank of India down by 2.56%, Power Grid Corporation of India down by 2.48% and IndusInd Bank down by 2.21% were the top losers.

The European markets were trading in red, France's CAC 40 was down by 0.70%, Germany's DAX was down by 0.03% and United Kingdom's FTSE 100 was down 0.21%.

The Asian markets concluded Friday’s trade mostly in red, with the regional benchmark index paring its biggest monthly advance since September. Thailand Trade Balance fell to a seasonally adjusted -0.56B, from 3.48B in the preceding month. Japan’s industrial production fell to a seasonally adjusted -2.5%, from 0.7% in the preceding month while the percentage of the total work force that is unemployed and actively seeking employment during the previous month remained unchanged at a seasonally adjusted 3.6%. Japanese Housing Starts fell to a seasonally adjusted -3.3%, from -2.9% in the preceding quarter while Japanese Household Spending fell to a seasonally adjusted -4.6%, from 7.2% in the preceding month. Japan’s National Core CPI rose to a seasonally adjusted 3.2%, from 1.3% in the preceding month while Tokyo’s core CPI, which excludes fresh food costs rose to at an annualized rate of 2.8%, from 2.7% in the preceding month.