Benchmarks continue to trade in red in late morning session

Indian bourses continued to trade in red in the late morning session as funds and retail investors engaged in reducing positions amid a weak trend in global markets. Sentiment on the street weakened after the International Monetary Fund (IMF) cut its outlook for global growth in 2015 and warned about the risks of rising geopolitical tensions and a financial-market correction as stocks reach ‘frothy’ levels. The IMF further stated that the global economy will expand 3.3 per cent this year, one-tenth of a point below what it forecast in July. Besides, some Investors remained on sidelines ahead of the second quarter earnings with Infosys to kick-start the September quarter earnings season on Friday. However, traders got some support with the World Bank’s twice-a-year South Asia Economic Focus report, which has stated that Indian economy, which accounts for 80 percent of South Asia's output, is set to grow by 6.4 percent in 2015-16 as against 5.6 percent in 2014-15.

On the sectoral front, Banking shares were in demand after Finance Secretary declared the government's intention to allow Public Sector banks to tap markets to procure funds required for the additional capital under Basel III. On the other hand, Pharma stocks were under pressure after 14 generic drug manufacturers were asked to submit detailed information related to price hikes in the US. In scrip specific development, Shares of Larsen & Toubro have surged after the company’s wholly-owned subsidiary L&T Technology Services received approval from the Competition Commission of India to acquire the engineering business of US-based Dell Product and Process Innovation Services. Besides, Hinduja Global Solutions rose after Birla Sun Life mutual fund bought 5.78 lakh shares.

On the global front, Asian markets slipped following a US and European sell-off that came in response to more weak German data and the International Monetary Fund's (IMF) decision to cut its growth forecast for the global economy. Back home, the rupee weakened by five paise to 61.48 against the dollar in early trade due to increased demand for the US currency from importers. The market breadth on BSE was positive, out of 2192 stocks traded, 1090 stocks advanced, while 1024 stocks declined on the BSE.

The BSE Sensex is currently trading at 26234.98 down by 36.99 points or 0.14% after trading in a range of 26334.35 and 26187.81. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.15%, while Small cap index was down by 0.01%.

The gaining sectoral indices on the BSE were Capital Goods up by 1.39%, Oil & Gas up by 0.88%, PSU up by 0.86%, FMCG up by 0.79% nad Power up by 0.61%, while IT down by 2.49%, TECK down by 2.16%, INFRA down by 0.28% and Realty down by 0.08% were the losing indices on BSE.

The top gainers on the Sensex were BHEL up by 2.22%, Larsen & Toubro up by 1.94%, ITC up by 1.31%, SBI up by 1.21% and NTPC up by 1.14%. On the flip side, Cipla down by 3.11%, Dr. Reddys Lab down by 2.71%, Infosys down by 2.70%, Wipro down by 2.61% and TCS down by 2.37% were the top losers.

Meanwhile, the World Bank in its twice-a-year South Asia Economic Focus report has said that Indian economy, which accounts for 80 percent of South Asia's output, is set to grow by 6.4 percent in 2015-16 as against 5.6 percent in 2014-15. It added that over the next year or so economic growth should be supported by the recovering US economy that would provide a market for Indian merchandise and service exports.

The report said that the region's economy will expand by a real 6 percent in 2015 and by 6.4 percent in 2016 compared to 5.4 percent this year, potentially making it the second fastest growing region in the world after East Asia and the Pacific. India is benefiting from a “Modi dividend”, the report said, with economic activity buoyed by expectations from the newly elected government of Prime Minister Narendra Modi.

The global agency has further illustrated that India's long-term growth potential remains high due to favourable demographics, relatively high savings, and policies and efforts to improve skills and education, facilitate domestic market integration and incentivize manufacturing activities. Though, it said that Inflation is expected to decline with monetary policy switching to inflation targeting but cautioned that the current account deficit is expected to widen somewhat as import demand and capital inflows rise.

Reviewing the risks facing South Asia’s economies, home to a fourth of mankind, the report notes that all developing economies are vulnerable to the effects of monetary tightening in a recovering U.S. economy and of stagnation in the weaker Euro zone.

The CNX Nifty is currently trading at 7,846.65 down by 5.75 points or 0.07% after trading in a range of 7,869.90 and 7,826.70. There were 31 stocks advancing against 19 declining on the index.

The top gainers on Nifty were BHEL up by 2.41%, BPCL up by 2.31%, Larsen & Toubro up by 2.05%, SBI up by 1.34% and ITC up by 1.30%. On the flip side, Tech Mahindra down by 4.13%, Cipla down by 3.48%, Wipro down by 2.78%, Dr. Reddys Lab down by 2.73% and Infosys down by 2.71% were the top losers.

Asian markets trade mostly lower; Nikkei 225 tumbled by 1.21%, Hang Seng contracted 0.72%, KOSPI Index decreased by 0.38%, Straits Times slipped 0.39%, Jakarta Composite dipped 0.99%, FTSE Bursa Malaysia KLCI declined by 0.29% and Taiwan Weighted was down by 0.42%. On the flip side, Shanghai Composite was up by 0.51%.