Barometer gauges continue to languish into negative territory; Sensex trades sub 25,200 level

Local barometer gauges, continued losing ground in absence of any positive trigger that could lift the markets higher, with traders now keenly waiting for May IIP data to be released later in the evening. Street widely expects industrial output (IIP) to expand by 3.8% annually, up for the second straight month after posting a 3.4% rise in April - it’s first since January.Further, skepticism about whether the new government of Prime Minister Narendra Modi could achieve its ambitious fiscal deficit target, also triggered some profit-booking. Prime Minister Narendra Modi's new government unveiled its maiden budget which sought to revive growth and curb borrowing, provided no clarity on the way to reduce the fiscal deficit and restore investor confidence.

However, further slide of local bourses was restricted on account of gains of IT sector, which sprung back to life after Infosys, India's second-largest software services exporter, beating estimates, posted a 21.6% increase in quarterly net profit. Nevertheless, somber global cues and concerns over monsoon continued to weigh on the sentiments. At day’s low, both Sensex and Nifty were trading below the crucial 25,200 and 7,550 levels respectively, with heavy losses of over 3 /4 of a percent. Meanwhile, broader indices witnessed deeper cuts of over 1.25%.

On the global front, while Asia pacific stocks looked set for negative close, European shares stabilise after sharp fall on Thursday triggered by concerns about the financial health of Portugal's top listed lender. Investors were encouraged by signs that funds were taking money out of peripheral euro zone debt and seeking higher returns in the emerging world.

Closer home, besides the uptick of IT stocks, Healthcare and Fast Moving Consumer Goods (FMCG) turned out to be investors’ darlings. On the flip side, much of drubbing was suffered by stocks from Power, Metal and Public Sector Undertaking (PSU) counters.  Meanwhile, Realty stocks which emerged budget day darling after FM proposed tax incentives for REITs, were down on profit-booking. The overall market breadth on BSE was in the favour of declines which outpaced advances in the ratio of 1407:477; while 16 shares remained unchanged.

The BSE Sensex is currently trading at 25170.22, down by 202.53 points or 0.80% after trading in a range of 25154.80 and 25548.33. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.39%, while Small cap index down by 1.22%.

The gaining sectoral indices on the BSE were Healthcare up by 1.25%, IT up by 0.95%, FMCG up by 0.77%, TECK up by 0.59%, Consumer Durables up by 0.19% while, Power down by 3.25%, Metal down by 3.15%, PSU down by 2.68%, Capital Goods down by 2.31%, Oil & Gas down by 2.21% were the losing indices on BSE.

The top gainers on the Sensex were Sun Pharma Industries up by 1.80%, Dr. Reddys Lab up by 1.36%, ITC up by 1.33%, TCS up by 1.28% and Hindustan Unilever up by 1.20%. On the flip side, Hindalco down by 5.56%, BHEL down by 5.41%, Tata Power down by 3.88%, Tata Steel down by 2.72% and SBI down by 2.68% were the top losers.

Meanwhile, weak rainfall in India during the ongoing monsoon season has raised concerns of a first drought in five years. Till now, the overall rainfall stood at around 45 percent, below the seasonal average. Poor monsoon can impact Indian economic growth as the agriculture sector, which comprises around 15% of the GDP, is mainly depended upon the monsoon rains. Further, a poor monsoon can impact India’s exports, stoke inflation particularly food inflation and lead to lower demand for products ranging from cars to consumer goods. In 2009, India had faced worst drought in nearly four decades that forced the country to import large amount of food commodities. 

The Indian Meteorological Department (IMD) had already highlighted that southwest monsoon may be below normal, with the country likely to receive 93 percent of the long-period average (LPA) rainfall. The department further indicated that probability of the El Nino effect, which may result in deficient rains, especially in the latter half of the monsoon season. Except for the northeast, every other part in India is predicted to get below normal rainfall this season. As per the IMD’s region-wise prediction, seasonal rainfall over north-west India is likely to be 85% of LPA, 94% over central India, 93% over south peninsula and 99% of LPA over north-east India.

Inflation in food articles rose by 9.50% y-o-y in May as compared to 8.64% in April. Food inflation can increase in near term as weak monsoon rains would impact the performance of Indian agriculture sector.

The CNX Nifty is currently trading at 7516.45, down by 51.30 points or 0.68% after trading in a range of 7508.75 and 7625.85. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were Lupin up by 1.69%, ITC up by 1.67%, Hindustan Unilever up by 1.61%, Sun Pharma Inds. up by 1.60% and Dr. Reddys Lab up by 1.52%. On the flip side, BHEL down by 5.27%, Hindalco down by 5.25%, NMDC down by 4.22%, Jindal Steel & Power down by 3.18% and Tata Power down by 2.93% were the top losers.

Asian stocks were mostly into negative territory; with Shanghai Composite rising by 6.65 points or 0.33% to 2,045.00; Straits Times adding by 19.43 points or 0.59% to 3,288.93.

On the flip side, Jakarta Composite down by 84.56 points or 1.66% to 5,013.45, Hang Seng down by 0.3% to 23,168.40; Taiwan Weighted lost 69.28 points or 0.72% to 9,495.84; Nikkei 225 slipped 52.43 points or 0.34% to 15,164.04; KOSPI Index shed 14.1 points or 0.7% to 1,988.74 and FTSE Bursa Malaysia KLCI losing 7.4 points or 0.39% to 1,885.22

European Markets were trading into positive territory; France’s CAC increased 15.74 points or 0.37% to 4,317.00; UK’s FTSE 100 increased 16.18 points or 0.24% to 6,688.55 and Germany’s DAX increased 23.2 points or 0.24% to 9,682.33