Markets continue to languish into negative territory

Indian equity markets, although off day’s low, but continue to languish into negative territory, with losses of over three fourth of a percent. However, with bit of recovery after the release of five year low August WPI data, markets have managed to scale back some of its losses, which has taken both Sensex and Nifty above psychologically crucial 26,850 and 8,050 levels respectively. Meanwhile, broader indices continuing to outperform larger peers with fat margins were trading with gains in the range of 0.40%-0.75%. On the macro-front, India's main inflation gauge, based on monthly WPI, stood at 3.74% for the month of August as compared to 5.19% in the previous month and 6.99% during the corresponding month of the previous year. Meanwhile, market-participants also drew some solace from RBI’s governor’s statement. Reserve Bank of India (RBI) Governor Raghuram Rajan said India's macroeconomic indicators were improving and that inflation was coming down consistent with the central bank's forecast.

On the global front, while Asian pacific shares were set for a mostly red close, European shares slumped on Monday, burdened by Chinese industrial production growth slowing to a level last seen during the time of the global financial crisis almost six years ago. China’s value-added industrial output grew by just 6.9% in August year -over-year, down from 9.0% in July, the National Bureau of Statistics showed on Saturday, representing the weakest growth streak since December 2008 and dealing a harsh blow to companies and economies heavily dependent on China.

Closer home, with most of the sectoral indices succumbing to selling pressure, stocks from Infra, Realty and Power counters were the only exceptions. On the flip side, stocks from Metal, IT and Oil & Gas counters were the prominent losers of the session. Meanwhile, Tyre makers extended recent rally with shares of MRF, Goodyear India and TVS Srichakra scaling record high. Additionally, PSU bank stocks reversed initial losses after Reserve Bank of India (RBI) Governor Raghuram Rajan that there was a need to change the management appointment process in public sector banks to make it more transparent and that the central bank is in talks with the government to improve governance in public sector banks. The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1695:1229; while 100 shares remained unchanged.

The BSE Sensex is currently trading at 26861.92, down by 199.12 points or 0.74% after trading in a range of 26813.02 and 26998.07. There were 6 stocks advancing against 24 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 0.75%.

The gaining sectoral indices on the BSE were INFRA up by 0.34%, Realty up by 0.23%, Power up by 0.22% while, Metal down by 1.38%, IT down by 0.91%, Oil & Gas down by 0.71%, FMCG down by 0.67%, TECK down by 0.58% were the losing indices on BSE.

The top gainers on the Sensex were Cipla up by 2.23%, Hero MotoCorp up by 1.45%, BHEL up by 0.68%, HDFC Bank up by 0.64% and Dr. Reddys Lab up by 0.54%. On the flip side, Hindalco down by 2.97%, Tata Steel down by 1.78%, ONGC down by 1.64%, TCS down by 1.63% and Wipro down by 1.52% were the top losers.

Meanwhile, easing at five years low, India's main inflation gauge, based on monthly WPI, stood at 3.74% for the month of August as compared to 5.19% in the previous month and 6.99% during the corresponding month of the previous year. The figure was way below the street expectations, which were expecting headline inflation to be in the range of 4%-4.15% for the month under review. However, June inflation figures were revised upwards to 5.66% from 5.43% earlier. Meanwhile, build up inflation rate in the financial year so far was 3.00% compared to a build up rate of 5.23% in the corresponding period of the previous year.

The five-year low inflation data was mainly on account of moderation in fuel costs. Fuel & Power index, which occupies 14.91% weight in the overall index, declined by 0.3% to 214.00 (provisional) from 214.7 (provisional) for the previous month due to lower price of petrol and furnace oil (3% each) and bitumen (2%). However, the price of high speed diesel (1%) moved up. Besides, food inflation in August hit a lowest level since January 2012. It eased to 5.15 percent versus 8.43 percent on a month-on-month (MoM) basis. Meanwhile, the index of Manufactured Products, which occupies the majority 64.97% weight in WPI index, rose by 0.3% to 155.8 (provisional) from 155.4 (provisional) in July.

Additionally, Primary Articles index, which occupies 20.12% weight in the overall headline index, also rose by 2.00% to 261.7 (provisional) from 256.6 (provisional) for the previous month. Out of the index, 'Food Articles’ group rose by 2.6% to 265.4 (provisional) from 258.6 in the previous month, while index for  ‘Non-Food Articles’  group rose by 0.3% to 218.7 (provisional) from 218.1 for the previous month.

The fall in wholesale inflation is likely to build pressure on RBI for cut in the repo rate, or the rate at which the Reserve Bank of India lends to banks. Adding to this, the low 0.5% growth in July in industrial production, and a marginal easing of retail inflation rate of 7.8% in August would also be considered

The CNX Nifty is currently trading at 8051.70, down by 53.80 points or 0.66% after trading in a range of 8030.00 and 8077.30. There were 15 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were United Spirits up by 3.60%, Cipla up by 2.21%, PNB up by 2.17%, Hero MotoCorp up by 1.36% and Lupin up by 1.36%. On the flip side, Jindal Steel & Power down by 3.87%, Hindalco down by 2.91%, Kotak Mahindra Bank down by 1.97%, Asian Paints down by 1.88% and TCS down by 1.75% were the top losers.

Asian markets were set for mostly red close; with Hang Seng down by 238.33 points or 0.97% to 24,356.99; Straits Times down by 15.91 points or 0.48% to 3,329.64; FTSE Bursa Malaysia KLCI down by 7.42 points or 0.4% to 1,848.22; KOSPI Index down by 6.04 points or 0.3% to 2,035.82; Taiwan Weighted down by 5.72 points or 0.06% to 9,217.46 and Jakarta Composite down by 2.66 points or 0.05% to 5,141.05. On the flip side, Shanghai Composite up by 7.19 points or 0.31% to 2,339.14 and Nikkei 225 up by 39.09 points or 0.25% to 15,948.29 were the gainers amongst Asian pack.

European markets were mostly trading lower; with France’s CAC trading lower by 9.02 points or 0.2% to 4,432.68; UK’s FTSE 100 shedding 1.07 points or 0.02% to 6,805.89; while Germany’s DAX was trading up by 6.17 points or 0.06% to 9,657.30.