Markets witness dramatic recovery; Nifty reclaims 7,700 mark

Recovering from day’s low and shifting gears, local equity markets were trading into positive territory tailing positive start of European counterparts, while bargain hunting of select fundamentally strong blue-chip stocks, available at attractive valuation post sharp sell-off in early noon deals, also aided sentiment. Markets took a hit for the worst as RBI introduced no special measures for managing liquidity, slashed HTM ceiling and stroke a hawkish tone on inflation front by projecting an upside risk to 2016 inflation target of ‘6%’, the aftermath of which was widely felt by banking stocks. However, buying, which took place after positive European markets mainly got the benchmarks out of the woods, with both Sensex and Nifty trading above the psychologically crucial 25,750 and 7,700 levels respectively. Meanwhile, broader indices also bouncing back were trading with gains of around half a percent.

On the global front, European shares traded a touch higher early on Tuesday as strong results from German car maker BMW and other blue-chip stocks supported an otherwise subdued market. Shares in BMW rallied around 3% after the luxury car maker reported a higher-than-expected second-quarter operating profit, helped by new offroad models and strong China sales.

Closer home, recovery of markets was mainly led by stocks from Consumer Durable, Realty and Information Technology counters, besides Auto stocks which held their head above water even at day’s low point. On the flip side, selling in Capital Goods, Power and Infra counters continued to remain the pockets of weakness for the markets. Gains also crept into Dalal Street after shares of rate-sensitive sectors such as banks, auto and real estate, which came under selling pressure post the Reserve Bank of India (RBI) review, managed to recoup losses after Raghuram Rajan assured investors that short-term risks were more balanced currently and the RBI had room to cut rates if disinflation continues. The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1591:1202; while 125 shares remained unchanged.

The BSE Sensex is currently trading at 25776.33, up by 53.17 points or 0.21% after trading in a range of 25562.36 and 25831.53. There were 16 stocks advancing against 13 stocks declining on the index. The broader indices were trading in green; the BSE Mid cap index was up by 0.41%, while Small cap index up by 0.68%.

The gaining sectoral indices on the BSE were Auto up by 1.62%, Consumer Durables up by 1.12%, Realty up by 0.44%, IT up by 0.30%, TECK up by 0.22% while, Capital Goods down by 0.39%, Power down by 0.21%, INFRA down by 0.14%, FMCG down by 0.11%, Oil & Gas down by 0.06% were the losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 2.62%, Bajaj Auto up by 2.18%, Hindalco up by 2.08%, ONGC up by 2.00% and Sun Pharma Inds up by 1.88%. On the flip side, NTPC down by 1.17%, Coal India down by 1.07%, Hero MotoCorp down by 1.03%, Reliance Industries down by 0.82% and ICICI Bank down by 0.66% were the top losers.

Meanwhile, the activity in Indian services sector, which accounts for around 60% of Indian GDP, slightly eased in the month of July due to slowdown in new business orders. The HSBC services Purchasing Managers’ Index (PMI), based on the survey of around 350 private service sector companies, fell to 52.2 in July from17-month high at 54.4 in June. Though the pace of output slowed from June, the latest reading stood above 50 mark indicating third successive monthly expansion in Indian services sector. Among the six monitored sub-sectors, only Hotels & Restaurants and Transport & Storage companies registered reductions in services activity.

The HSBC Survey indicated that new business in the service sector rose for a third month in a row in July, indicating improvement in demand. The rate of expansion was reduced from the previous month but remained solid. Amid reports of stronger demand and delayed payments from clients, levels of outstanding business rose in July, extending the current sequence of growth to five months. The HSBC India Composite Output Index, which measures activity in both the manufacturing and services sector, declined from June’s16-month high of 53.8 to 53 in July.

The survey signaled a steady inflation reading with input costs faced by Indian services firms increased for a sixty-fourth consecutive month in July owing to higher prices of oil and food products. However, the rate of cost inflation slowed from June and was weaker than the series average. Accordingly, services firms passed increased cost burden to consumers, marking a 62-month period of charge inflation. The survey highlighted that staffing levels in the Indian service sector fell fractionally in the reported month. Indian services companies also maintained their positive outlook for output growth over the next 12 months on the back of supportive factors such as forecasts of stronger demand, new government policies and the introduction of new marketing initiatives.

The CNX Nifty is currently trading at 7705.55, up by 21.90 points or 0.29% after trading in a range of 7638.05 and 7720.00. There were 27 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were Ultratech Cement up by 4.09%, ACC up by 3.38%, Ambuja Cement up by 3.13%, Grasim Industries up by 3.02% and Mahindra & Mahindra up by 2.58%. On the flip side, BPCL down by 1.64%, NTPC down by 1.06%, Coal India down by 1.03%, HCL Tech. down by 0.95% and Hero MotoCorp down by 0.94% were the top losers.

Asian markets were set for red close; Taiwan Weighted slid by 188.75 points or 2.02% to 9,141.44; Nikkei 225 lost 154.19 points or 1% to 15,320.31; Jakarta Composite surrendered 21.31 points or 0.42% to 5,097.94; KOSPI Index dropped 14.16 points or 0.68% to 2,066.26;  Shanghai Composite edged lower 3.39 points or 0.15% to 2,219.95; FTSE Bursa Malaysia KLCI shed 2.15 points or 0.11% to 1,873.65.

On the flip side, Straits Times rose by 4.69 points or 0.14% to 3,323.09 and Hang Seng added 48.18 points or 0.20% to 24,648.26 were the top gainers among Asian pack.

European markets were trading positively; France’s CAC gained 25.85 points or 0.61% to 4,243.07; UK’s FTSE 100 rose 30.11 points or 0.45% to 6,707.63 and Germany’s DAX added 55.87 points or 0.61% to 9,210.01.