Benchmarks end higher ahead of IIP, CPI data

Snapping three days of continuous fall, Indian equity benchmarks ended with a gain of around quarter a percent with frontline gauges recapturing their crucial 27,050 (Sensex) and 8,100 (Nifty) levels. Domestic markets traded extremely choppy throughout the session where key indices slipped several times below the neutral line only to recover later. Nevertheless, buying in last leg of trade mainly aided the sentiment at Dalal Street.

Meanwhile, investors remained on sidelines ahead of important macro data -- IIP for the month of July and CPI inflation data for the month of August -- scheduled to be released in the evening. IIP for July is likely to fall to 1.7 percent month on month primarily due to weak core sector data, while the CPI for august is likely to soften to 7.7 percent. However, gains remained capped as some cautiousness crept in with RBI Governor Raghuram Rajan’s statement that abrupt reversal of low interest rates globally could create substantial amounts of damage and that it should be done in predictable and careful way.

On the global front, European counters made a sluggish start on Thursday, weighed down by jitters over the upcoming referendum on Scottish independence and the impact of fresh EU sanctions against Russia. Asian markets ended mixed as investors awaited the release of Chinese economic statistics at the weekend and global sentiment was dampened by the upcoming Scottish independence vote and weak inflation data.

Back home, India recorded its heaviest spell of monsoon rains in 2014 in the past week, logging in surplus for the second straight week, raising hopes of a delayed retreat of the four-month season. Appreciation in Indian rupee too aided the sentiments. The rupee was trading at 60.72 per dollar at the time of equity markets closing as against Thursday’s close of 60.92.

Meanwhile, buying witnessed in infra stocks, as the ministry of urban development has prepared a draft concept note on the smart city scheme. Various states will have to submit proposals based on the reference framework to the central government. Stocks related to auto space too remained on buyers’ radar on report that the government is looking at the proposal for extending excise duty concessions to the automobile sector beyond December. It is also reported that the Heavy Industry Ministry is likely to send a proposal to Finance Ministry regarding extension of excise duty concession till March 31, 2015. On the flip side, pharmaceuticals stocks extended previous sessions’ decline, which were triggered by reports that Sun Pharma’s manufacturing facility in Halol, Gujarat is undergoing a surprise inspection by the US Food and Drug Administration (USFDA).

The NSE’s 50-share broadly followed index Nifty surges by around twenty points to end above the psychological 8,100 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by over sixty points to finish above the psychological 27,050 mark. Broader markets too were traded in-line with benchmarks and ended the session with a gain of around quarter a percent. The market breadth remained in favour of advances, as there were 1741 shares on the gaining side against 1312 shares on the losing side while 106 shares remain unchanged.

Finally, the BSE Sensex gained 65.17 points or 0.24%, to 27061.04, while the CNX Nifty added 19.80 points or 0.24% to 8,105.50.

The BSE Sensex touched a high and a low of 27096.87 and 26965.91, respectively. The BSE Mid cap index was up by 0.20%, while the Small cap index gained 0.50%.

The top gainers on the Sensex were Cipla up by 6.38%, Maruti Suzuki up by 1.87%, Bharti Airtel up by 1.85%, ITC up by 1.40% and Sesa Sterlite up by 1.36%. On the flip side, Hindalco down by 2.29%, Sun Pharma down by 2.05%, Tata Power down by 1.65%, NTPC down by 1.50% and Larsen & Toubro down by 1.10% were the top losers in the index.

On the BSE Sectoral front Healthcare up by 0.74%, Consumer Durables up by 0.72%, Auto up by 0.64%, FMCG up by 0.54% and Bankex up by 0.29% were the top gainers, while Power down by 1.29%, Capital Goods down by 0.81%, Realty down by 0.36%, Metal down by 0.21% and Oil & Gas down by 0.14% were the top losers in the space.

Meanwhile, as the developed nations raised concerns over India for not disclosing agri subsidies over the long period, the government has claimed that India's farm subsidies are well below the World Trade Organisation's (WTO) cap of 10 percent and the developed world should move ahead with finding a permanent solution for stock piling of grains for food security purposes. India had not notified its farm subsidies to the WTO since 2003-04 and thus the US and other developed countries had alleged that India has breached the 10 percent cap. India has now filed the notification for seven years (2004-2005 to 2010-2011) to the WTO and the new updated information would ascertain the developed nations that India has complied with the WTO requirements. According to the filed notification, India’s aggregate measurement of support (AMS) for rice, or subsidy for procurement of rice, has been calculated at $2.3 billion in 2010-11. India has cleared to the WTO that its subsidy for rice is within the prescribed limit. However, India’s subsidies for wheat remained in the negative, against the prescribed limit of 10 percent. India’s input subsidies including fertiliser and electricity subsidies almost tripled during the notification period to $29.1 billion in 2010-11 from $10.3 billion in 2004-05.

With regular increase in minimum support price (MSP) every year in India, the market-distorting subsidy keeps increasing too, threatening to breach the 10 percent cap set by WTO. According to WTO rules, the domestic price support is calculated as the difference between the MSP provided by the Indian government and fixed external reference price prevailing between 1986-88.

Developing countries including India argue that the reference period of 1986-88 is outdated and that they need to be given flexibility to stock enough grains for the food security of millions of their poor.  In December 2013 at Bali, developed countries agreed to find a permanent solution to this issue by 2017.

The CNX Nifty touched a high and low of 8,114.30 and 8,071.60 respectively.

The top gainers of the Nifty were Cipla up by 6.11%, Lupin up by 3.12%, Bank of Baroda up by 2.61%, Bharti Airtel up by 2.09% and Asian Paints up by 1.99%. On the other hand, Hindalco Industries down by 2.43%, Cairn India down by 2.16%, Sun Pharmaceuticals Industries down by 2.02%, UltraTech Cement down by 1.80% and Tata Power Company down by 1.76% were the top losers.

Most of European markets were trading in red, France's CAC 40 was down by 0.16%, and Germany’s DAX was down by 0.27%, while United Kingdom's FTSE 100 was up by 0.13%.

Asian markets ended mixed on Friday, as Chinese lending data added to signs the region’s biggest economy is weakening. Japanese shares advanced for a fifth day to extend a six-year high as exporters rose with the yen trading near its weakest against the dollar since 2008. A report showed aggregate financing, China’s broadest measure of credit, trailed estimates in August, adding to the government’s challenge to meet its economic growth target amid a slumping property market and a pullback in manufacturing. Chinese M2 Money Stock fell to 12.8%, from 13.5% in the preceding month. Industrial production in Japan rose more-than-expected last month. The industrial production rose to a seasonally adjusted 0.4%, from 0.2% in the preceding month. South Korean Interest Rate Decision remained unchanged at a seasonally adjusted annual rate of 2.25%, compared to the preceding quarter while South Korean Unemployment Rate rose to a seasonally adjusted annual rate of 3.5%, from 3.4% in the preceding month.