Benchmarks extend northward journey for fourth straight day

Extending their northward journey fourth day in a row, Indian equity benchmarks ended the session in the green with frontline gauges recapturing their crucial 25,600 (Sensex) and 7,650 (Nifty) bastions, as better-than-expected first quarter earnings from Tata Consultancy Services (TCS) sparked a rally in IT stocks and offset global worries over the downing of an airliner in Ukraine. Sentiments also remained up-beat on reports that the foreign direct investment (FDI) flows into the country more than doubled to $3.60 billion in May, the highest in the last eight months.

Earlier, barometer gauges made a cautious start tailing weakness in the global markets but indices turned positive after Finance Minister Arun Jaitley said that India’s economic growth is expected to improve during the current fiscal from 4.7% in 2013-14, helped by a revival in industrial growth, improved fiscal health and external economic situation. However, gains remained capped after the Indian Agriculture Research Institute officials stated that if monsoon remains weak in key States in the next week, then kharif production is likely to be lower by an estimated 10 per cent.

Sluggish global cues too limit the gains with European markets were trading lower as investors stayed away from riskier assets over the escalating tensions between Ukraine and Russia. Asian markets ended mostly in the red terrain after a Malaysia plane was shot down over Ukraine and Israel sent troops into Gaza, spurring demand for haven assets.

Back home, shares of information technology (IT) companies remained on buyers’ radar after TCS reporting better than expected net profit for the quarter ended June 2014 (Q1). The company has reported 45.01% rise in its consolidated net profit at Rs 5567.68 crore for the quarter as compared to Rs 3839.50 crore for the same quarter in the previous year. Total income has increased by 25.50% at Rs 22898.18 crore for quarter under review as compared to Rs 18245.56 crore for the quarter ended June 30, 2013. On the flip side, stocks related to power sector remained under pressure on reports that nearly half of the thermal power plants in the country, including over 20,000 MW capacity stations of state-run NTPC, are reeling under coal shortage with stocks to last less than a week.

The NSE’s 50-share broadly followed index Nifty ended higher by over twenty points to end above its psychological 7,650 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex edged higher by over eighty points to end above the psychological 25,600 mark. The broader markets, however, remained under pressure and ended the session with a cut of around half a percent. The market breadth remained in favour of decliners, as there were 1,438 shares on the gaining side against 1,511 shares on the losing side while 101 shares remain unchanged.

Finally, the BSE Sensex surged by 80.40 points or 0.31%, to 25641.56, while the CNX Nifty gained 23.45 points or 0.31%, to 7,663.90.

The BSE Sensex touched a high and a low of 25713.40 and 25441.24, respectively. The BSE Mid cap index was down by 0.42%, while Small cap index lost 0.12%.

The top gainers on the Sensex were Hero MotoCorp up by 2.62%, TCS up by 2.58%, Axis Bank up by 2.10%, ICICI Bank up by 1.97% and Wipro up by 1.83%. On the flip side, the key losers were Tata Power down by 2.58%, Hindalco Inds down by 2.23%, BHEL down by 2.10%, Maruti Suzuki down by 1.70% and Gail India down by 1.69%.

On the BSE sectoral front, IT up by 1.43%, Teck up by 0.91%, Bankex up by 0.77% and Capital Goods up by 0.42% were the only gainers, while Power down by 1.34%, PSU down by 0.92%, Realty down by 0.88%, Consumer Durables down by 0.88% and Oil & Gas down by 0.77% were the top losers in the space.

Meanwhile, the revival in monsoon rains over the last five-six days has reduced the rainfall deficit by 8 percentage points to 35% and accelerated planting of crops which was at half of last year's level. Rainfall is expected to continue for the next 10 days which would help farmers plant more rice, oilseeds, pulses, cotton and coarse grains.  However, the late sowing may mean lower returns, particularly if rainfall is uneven in the weeks ahead. The southwest monsoon covered the entire country two days after its normal date July 15.

In current year, monsoon had been very weak till the first half of July and rain deficit had grown to 43%. However, with good rains forecast for the rest of July, the Indian Meteorological Department (IMD) expects the deficit to progressively narrow in the coming days.

Monsoon rain is crucial for India as 55% of the arable land depends entirely on rain for irrigation. Timely and normal monsoon is also vital for rabi season (winter crops) also as it raises the water table and moisture content in the soil. Though, agriculture sector accounts for only about 15% of the economy, monsoon has a wider impact because it affects millions of people in villages who depend upon agriculture. 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 CNX Nifty touched a high and low of 7,685.00 and 7,595.50 respectively.

The major gainers of the Nifty were TCS up 2.65%, IDFC up by 2.57%, Hero MotoCorp up by 2.39%, HCL Technologies up by 2.39% and Kotak Mahindra Bank up by 2.34%. On the flip side, the key losers were Tata Power Company down by 2.72%, Ambuja Cements down by 2.36%, GAIL (India) down by 2.18%, Hindalco Industries down by 2.12% and BHEL down by 1.95%.

European markets were trading in red; UK’s FTSE 100 down by 0.49%, Germany’s DAX down by 0.68% and France’s CAC 40 was down by 0.19%.

The Asian markets concluded Friday’s trade mostly in red, after a Malaysia plane was shot down over Ukraine and Israel sent troops into Gaza, spurring demand for haven assets. According to the minutes of June 12-13 policy meeting released showed that some Bank of Japan board members warned that tough global competition and moves to produce locally for consumers are hitting exports. But the minutes also stated that the nine-member board agreed that Japan’s exports were likely to increase moderately. The minutes also highlighted that a few members pointed to the possibility that structural factors such as the declines in Japanese firms’ competitiveness and the shift of their production sites overseas could be influencing exports to a larger degree than expected.

Chinese Premier Li Keqiang stated that economic growth of slightly higher or lower than 7.5% this year would be acceptable as long as there was higher employment and wages. Li’s latest remarks signaled some flexibility in hitting the annual growth target and put more emphasis on reforms. Li added that the government will stick with its targeted approach in macro-economic policies, and will rely more on reforms and market forces to unleash growth drivers. In March, the government set an economic growth target of around 7.5% for 2014, along with an inflation target of around 3.5%. China’s new-home prices fell in a record number of cities tracked by the government as developers cut prices to boost sales volume, signaling curbs will be relaxed in more cities. Prices fell in 55 of the 70 cities last month from May, the most since January 2011 when the government changed the way it compiles the statistics.