Post Session: Quick Review

Reversal of trend which took place during last hour of trade mainly led to an upbeat session for Indian equity markets, which gathering gains of around three tenths of a percent, concluded above psychologically crucial 26,350 (Sensex) and 7,850 (Nifty) respectively. Recovery emerged in the late hours on the back of good September earnings from IndusInd Bank. Notably these gains also were scored ahead of the release of September CPI data and RIL’s earnings, which are up for release later in the day. On the macro-front, Street widely expects India’s consumer price inflation to have probably eased for second straight month in September at 7.20% against 7.80% in August, helped by lower food and fuel costs. Nevertheless, recovery which was witnessed towards the late hours of trade also lifted broader indices higher. Both BSE Midcap and Small-cap indexes went up with gains in the range of 0.30%-0.50%.

On the global front, Asian stocks declined on Monday amid concern that pledges to keep record-low interest rates won’t be enough to offset a global economic slowdown. Stocks fell on concern that valuations were too high as the US Federal Reserve removed stimulus and economic indicators from China and Japan to Germany signal weakness. Meanwhile, European shares which got off to a negative start, recouping most of their losses were trading mostly positive at this point of time.

Closer home, much of the downbeat mood of local equity market during the first half of the session could be blamed to subdued macro-economic data released after the market closed on Friday. In a nasty surprise, Industrial production growth slowed down to five-month low of 0.40% in August mainly due contraction in manufacturing output and lower off-take of consumer goods. Nevertheless buying which was initiated at lower levels undid bourses’ loss.

On the BSE, while most of the sectoral indices on BSE ended into positive territory, stocks from Metal, Banking and Information Technology (IT) were outperformers. Metal and mining stocks edged higher after better-than-expected Chinese September trade data. China, which is the world's largest consumer of steel, copper and aluminum, reported higher than expectation exports as well as Imports. While, Exports grew higher by 15.3% than last year, imports rose 7%, giving a trade surplus of $31 billion for the month.  Meanwhile, banking stocks’ recovery was led by splendid gains of IndusInd Bank, which beating street expectations, reported a jump of 30.30% in net profit for the quarter ended September 2014 at Rs 430.20 crore led by strong other income and lower provisions as compared to the profit in the year-ago period was at Rs 330.23 crore. Additionally, Technology stocks gained for the second day after Infosys’ earnings on Friday that beat expectations.

Country’s second largest software services exporter, Infosys, on Friday reported a higher-than-expected 28.6% increase in fiscal second quarter net profit of Rs 3096 crore as compared to Rs 2407 crore a year ago. Besides, weakness of rupee also worked in the favour of IT stocks, which derive lion share of their revenue from exports.  On the flip side, much of the drubbing was witnessed by stocks from Healthcare, followed by Fast Moving Consumer Goods (FMCG) and Capital Goods counters. The market breadth on the BSE remained in the favour of decliners; where advancing and declining stocks were in a ratio of 1441:1479, while 106 scrips remained unchanged. (Provisional)

The BSE Sensex ended higher by 86.69 points or 0.33% at 26384.07 after trading in a range of 26092.69 and 26443.16. There were 18 stocks advancing against 12 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index was up by 0.48%, while Small cap index up by 0.33%. (Provisional)

The gaining sectoral indices on the BSE were Metal up by 1.37%, Bankex up by 1.35%, IT up by 1.17%, TECK up by 0.97%, PSU up by 0.77% while and Realty down by 1.79%, Healthcare down by 1.04%, FMCG down by 0.54%, Capital Goods down by 0.50% and Consumer Durables down by 0.09% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Tata Power up by 2.96%, Tata Steel up by 1.97%, Axis Bank up by 1.78%, Coal India up by 1.69% and TCS up by 1.60%. On the flip side, Mahindra & Mahindra down by 3.75%, Cipla down by 2.86%, Sun Pharma down by 1.81%, Dr. Reddys Lab down by 1.79% and BHEL down by 1.25% were the top losers. (Provisional)

Meanwhile, deviating from the recommendations made by the expert committee headed by Deputy Governor Urjit R. Patel, Finance Minister Arun Jaitley has given a nod for a major overhaul of the current monetary policy framework, wherein the Centre will specify ‘inflation targets’ for the Reserve Bank of India (RBI) to achieve. Under the proposed new regime, the RBI will set inflation as its top priority in its policy statements.

Headed by Reserve Bank Deputy Governor Urjit R. Patel, an expert committee of the RBI was appointed to examine monetary policy, which had recommended that the monetary policy decision-making should be vested with a monetary policy committee, chaired by the RBI governor. Among other recommendations, it suggested apex bank to adopt new Consumer Price Index (CPI) as the measure of the nominal anchor for monetary policy and that the RBI set the target CPI inflation level at 4 per cent (+/- 2 per cent) to be achieved through its monetary policy tools.

However, Modi government has decided to take the onus of fixing the inflation targets as it felt that RBI shouldn’t’ set it for itself an inflation target of ‘4% for all times to come. In 2014-15 budget speech Mr. Jaitley said the Modi government was keen on moving to a modern monetary policy framework to meet the challenges of an increasingly complex economy.

RBI, in its fourth bi-monthly monetary policy stance and rationale, expressed upside risk to its target to bring consumer inflation down to 6% by January 2016, which continued to warrant policy preparedness to contain pressures if the risks materialized. However, the central bank highlighted that its immediate target in containing the consumer price index (CPI) inflation at 8% by January 2015, looked achievable.

India VIX, a gauge for markets short term expectation of volatility rose 1.18% at 14.50 from its previous close of 14.33 on Friday. (Provisional)

The CNX Nifty ended higher by 24.30 points or 0.31% at 7884.25 after trading in a range of 7796.00 and 7901.15. There were 29 stocks advancing against 20 stocks declining on the index. (Provisional)

The top gainers on Nifty were Tata Power up by 2.84%, NMDC up by 2.37%, PNB up by 2.27%, Tata Steel up by 2.16% and Axis Bank up by 2.03%. On the flip side, DLF down by 3.77%, Mahindra & Mahindra down by 3.68%, Cipla down by 2.78%, Sun Pharma down by 2.12% and Dr. Reddys Lab down by 1.86% were the top losers. (Provisional)

European Markets were trading in the green; UK’s FTSE 100 was up by 0.02%, France’s CAC was up by 0.30% and Germany’s DAX was up by 0.35%.

Asian markets ended mostly in red on Monday, as investors worried about global economic health. Japanese market remained shut for the trade today on account of ‘Health-Sports Day’ holiday. Chinese exports increased 15.3% from a year earlier compared with the 12% median estimate. Imports rose 7%, against projections for a 2% decline, leaving a trade surplus of $31 billion. China will release inflation data on October 15, while money supply data is scheduled for today. Indonesia’s vice finance minister stated that the country’s current account deficit shrank in the third quarter of this year to around 3% of gross domestic product. The balance of payments will be a surplus of around $6 billion. The current account deficit was 4.27% of GDP in the second quarter. The government and Bank Indonesia expects a smaller deficit for full year 2014 of around 3.2% of GDP. Chinese Trade Balance fell to 31.00B, from 49.83B in the preceding month.