Benchmarks pare losses to trade above neutral line

Indian equities pared off losses to trade in green above neutral line in the late afternoon session as investors started accumulating blue chip front line counters. Traders were seen piling up position in PSU, Capital Goods and Metal sector while selling was witnessed in Auto, TECk and FMCG sector. However, market men were still reluctant as concerns over the euro zone's huge refinancing needs persist ahead of German and Portugal’s bond auction but some encouraging comments and actions from Prime Ministers Mario Monti in Italy and Mariano Rajoy in Spain build the hopes. L&T and BHEL from Capital Goods space were seen trading firm in green helping the markets edge higher. SAIL, Hindalco, SesaGoa, Tata Steel and Sterlite from Metal pack were trading in green giving the much needed support. However, Bajaj Auto, M&M and Hero MotoCorp from Auto pack were seen trading in red driving the markets down.

In the scrip specific development, JBM Auto and Jay Bharat Maruti were trading firm after the JBM group acquired 51% stake in UK-based engineering services company Tesco GO for an undisclosed sum to strengthen its domestic and global business. Kingfisher Airlines was trading weak in red on reports that the Central Board of Excise and Customs reportedly warned the cash-strapped airliner of appropriate legal action if it fails to pay service tax dues by January 6, 2012. On the global front, all Asian markets traded on a mix note while the European markets were too trading in mix. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 4,750 and 15,900 levels, respectively. The market breadth on BSE was dominantly in favor of advances in the ratio of 1496:1060 while 120 scrips remained unchanged.

The BSE Sensex is currently trading at 15,964.53 up by 25.17 points or 0.16% after trading as high as 16,004.69 and as low as 15,839.70. There were 16 stocks advancing against 14 declines on the index.

The broader indices were trading on an optimistic note; the BSE Mid cap index gained 0.60% while Small cap rose 0.30%.

On the BSE sectoral space, PSU up 1.45%, Capital Goods up 1.35%, Metal up 1.13%, Bankex up 1.00% and Power up 0.92% were the major gainers while Auto down 0.61%, TECk down 0.35%, FMCG down 0.34% and IT down 0.02% were the only losers in the space.

Tata Motors up 3.71%, ICICI Bank up 2.84%, BHEL up 2.64%, Hindalco Industries up 2.12% and Tata Steel up 1.41% were the major gainers on the Sensex, while Bajaj Auto down 4.56%, M&M down 3.53%, Hero Motor down 2.45%, HUL down 2.23% and Bharti Airtel down 2.01% were the major losers in the index.

Meanwhile, service sector activity in India improved in the month of December as the sector grew at the fastest pace since July on the back of strong new business and output growth. The encouraging service sector report came a day after manufacturing activity data showed that the sector resiliently bounced in the month of December as it accelerated at a swiftest pace in last six months, highlighting the fact that the Indian private sector output registered strong growth in the last month of 2011.

According to the seasonally adjusted HSBC Business Activity Index, the service sector accelerated to 54.2 in December, as against 53.2 in the previous month of 2011. A figure above 50 signals expansion in production while, a number below 50 indicates contraction. Though the service sector growth in the month under review remained lower than the long-run series average, however, the purchasing managers' index (PMI) reading for the services sector, which measures the overall health of the sector, suggested that activity saw strongest improvement in business conditions in last five months.

After showing signs of cooling and even slipping to a two and a half year low of 49.1 in October, the service sector has bounced back as new orders increased for the thirty-second straight month in December while outstanding business also rose after remaining broadly unchanged in the last two months. Besides, employment in the sector too rose in the month after six straight months of showing job losses. But, the rate of input cost inflation grew deeper as it rose at the fastest rate in four months, remained stubbornly above the long-run series average.

Thus, the strong Manufacturing and Service sector PMI have propelled the HSBC Composite Index, which covers both the manufacturing and service sectors, to 54.7 in the 2011’s last month, higher from 52.3 seen in November 2011. However, concerns over slowing domestic economic condition amid uncertainty over global growth prospects still pose potential downside risks for the sectors. 

The S&P CNX Nifty is currently trading at 4,765.40, higher by 0.10 points after trading as high as 4,782.85 and as low as 4,733.05. There were 23 stocks advancing against 27 declines on the index.

The top gainers on the Nifty were HCL Tech up 4.39%, Tata Motors up 3.53%, ICICI Bank up 2.44%, BHEL up 2.32% and SAIL up 2.27%.

Bajaj Auto down 4.37%, ACC down 3.27%, M&M down 3.24%, Ambuja Cement down 2.71% and Bharti Airtel down 2.34% were the top losers on the index.

Asian markets were trading mixed; Jakarta Composite surged 1.12%, Nikkei 225 soared 1.24%, Straits Times advanced 0.66% and Taiwan Weighted gained 0.42%. On the flipside, Shanghai Composite plunged 0.27%, Hang Seng shed 0.80% and Seoul Composite declined 0.49%.

The European markets traded on a mix note, France’s CAC 40 dropped 0.60%, Germany’s DAX shed 0.24% and Britain’s FTSE 100 ascended 0.13%.