Benchmarks continue to hold their head above water

After positive opening, benchmarks continued to hold their head above water on selective buying by funds and retail investors amid mixed Asian cues. Investor sentiment was upbeat on expectations that the government would announce more reforms amid hopes of strong earnings from some more blue-chip companies. Some support also came in from reports that government has approved 20 FDI proposals, envisaging a total inflow of Rs 988.3 crore. However, gains remained capped on report that foreign institutional investors (FIIs) were net sellers to the tune of Rs 12.38 crore on October 23, 2014.

Traders were seen piling positions in Banking, Capital Goods and Power while selling was witnessed in Realty, Auto and Oil & Gas sector stocks. In scrip specific development, Shares of DLF plunged on reports that the new BJP-led Haryana government will investigate into the land deals between the company and Robert Vadra entered into during the regime of the previous Congress government. Furthermore, shares of Just Dial have declined after reporting 240 basis points (bps) declined in EBITDA or operating margins to 28.9% for the second quarter ended September 2014, mainly due to an increase in staff cost. On the other hand, IndusInd Bank rose after the government cleared banks proposal seeking increase in foreign investment in the bank to 74%.

On global front, mixed trading was witnessed in the Asian markets, taking heart from upbeat earnings and US economic data that eased recent global growth fears and sharpened risk appetite. Back home, Indian rupee was trading strong at 61.22 against the dollar in early trade on increased capital inflows amid selling of the American currency by exporters. The market breadth on BSE was positive, out of 2201 stocks traded, 1100 stocks advanced, while 1029 stocks declined on the BSE. 

The BSE Sensex is currently trading at 26891.77 up by 40.72 points or 0.15% after trading in a range of 26994.96 and 26851.12. There were 15 stocks advancing against 15 stocks declining on the index. The broader indices were trading mixed; the BSE Mid cap index was down by 0.68%, while Small cap index gained 0.11%.

The gaining sectoral indices on the BSE were Bankex up by 0.87%, Capital Goods up by 0.73%, Power up by 0.53%, PSU up by 0.38% and Metal up by 0.11% while, Realty down by 2.88%, Auto down by 0.65%, Oil & Gas down by 0.55%, TECK down by 0.39% and IT down by 0.31% were the losing indices on BSE.

The top gainers on the Sensex were BHEL up by 2.62%, Dr. Reddys Lab up by 2.29%, HDFC up by 1.76%, GAIL India up by 1.72% and SBI up by 1.20%. On the flip side, Tata Motors down by 1.59%, Mahindra & Mahindra down by 1.12%, Sun Pharma down by 0.88%, ONGC down by 0.84% and Wipro down by 0.76% were the top losers.

Meanwhile, Linking slow investment inflows in the country to complex structure of regulations and also scarcity of coal and electricity, new Chief Economic Adviser Arvind Subramanian has asserted that India needs better governance, a stronger state delivering security of contract, protecting property rights and adequate infrastructure to kick start growth in the country.

Arvind Subramanian further stressed that private sector has still remained underdeveloped due to a lot of regulations leading to less employment opportunities in the country. On the other hand, a lot of infrastructure projects have stalled because of lack of power or coal or because the companies are over indebted. Thus, removing these bottlenecks will be key to kick start growth in the country.

By adding further, Arvind Subramanian stated that a 5% growth rate is remotely not enough for India to grow and provide the jobs for the expanding labour force. India needs 7.5-8% growth for the next 20 years to address employment issues in the future.

Indian economic growth stayed below 5% for the second fiscal in a row at 4.7% during FY14. The factors like stubborn inflation, high interest rate, low investments and slow execution of infrastructure projects have impacted country’s economy growth. However, the economy has shown signs of nascent recovery during the first quarter of current fiscal. India’s economy expanded at its fastest pace in more than two years by 5.7% during the April-June quarter of current fiscal as compared to 4.7% growth recorded in same quarter last year.

The CNX Nifty is currently trading at 7,985.35 up by 57.60 points or 0.73% after trading in a range of 7,999.30 and 7,977.65. There were 40 stocks advancing against 10 declining on the index.

The top gainers on Nifty were Indusind Bank up by 2.94%, BHEL up by 2.64%, Dr. Reddys Lab up by 2.23%, HDFC up by 1.79% and GAIL India up by 1.64%. On the flip side, DLF down by 6.63%, Jindal Steel & Power down by 5.82%, Cairn India down by 3.13%, HCL Tech down by 2.37% and Zee Entertainment down by 1.60% were the top losers.

Asian markets were trading mixed; Hang Seng dipped 0.87%, Jakarta Composite slipped 0.33%, Shanghai Composite dropped 0.64% and Taiwan Weighted was down by 0.26%. On the flip side, Nikkei 225 gained 0.84%, Straits Times up by 0.07%, KOSPI Index increased by 0.32% and FTSE Bursa Malaysia KLCI was up by 0.27%.