Markets suffer profit booking ahead of RBI’s policy announcement

Indian equity markets suffered some late hour profit booking that dragged the major indices down by about half a percent on the very first day of the month. Though, the trade remained rangebound for most part of the day, ahead of the RBI's policy review, although the wide expectations are that Governor Raghuram Rajan who has resisted calls to cut the repo rate, even though retail price inflation has dipped below the 6% target he wants to hit by January 2016, may not oblige the street with a surprise. Still the traders were keeping some hopes that finance minister Arun Jaitley would argue with RBI governor to lower interest rates when the two meet ahead of an RBI interest rate decision later today.

The global cues were not very supportive as most of the Asian markets after a cautious start turned negative, as the Chinese Manufacturing Purchasing Managers' Index (PMI) edged down to 50.0 in November, a six-month low. The European markets too made a soft start led by decline in commodity and energy producers, after manufacturing slowed more than forecast from China to the euro area. German manufacturing unexpectedly shrank last month to 49.5 from 51.4. Manufacturing in France and Italy also shrank and a euro-area gauge was revised to 50.1 from 50.4.

Back home, the local bourses lost momentum after a weak start of the European markets and the early gains gathered in reaction to the better than expected GDP data for the second quarter announced late Friday was finally given up. The economy slowed in second quarter at 5.3 per cent from 5.7 per cent in the previous April-June quarter, dragged down by the poor performance of the manufacturing sector. Though, the numbers were much better than the street expectations and the GDP growth for the first half of the year, April-September stood at 5.5 per cent as against 4.9 per cent in the same period last year.In the latter part of the trade the markets even ignored an upbeat reading of manufacturing sector in the month of November, as the HSBC India Purchasing Managers' Index (PMI) rose from 51.6 to 53.3 to reach a 21-month peak. Manufacturing operating conditions in the country improved for the 13th month in a row, supported by stronger growth of output and new work intakes. The weakness in domestic currency also weighed on the sentiments, as the rupee extending its fall slipped to fresh nine months low, after the dollar strengthened overseas. There was scrip and sector specific movements that kept the markets buzzing for the day, while the consumer durables sector, despite paring some gains maintained its lead till last, the auto sector stocks were in action after reporting their monthly sales numbers for the month of November. Most of the auto companies reported good numbers, largest car maker Maruti Suzuki’s sales were up by 19.5%, TVS motors reported gains of 36%, Eicher Motors sales zoomed by 52% and Atul Auto’s sales were up by 19%, and Ashok Leyland reported 44% rise, while Escorts reported a decline of 27% in its sales and M&M sales were

Finally, the BSE Sensex plunged by 134.37 points or 0.47%, to 28559.62, while the CNX Nifty declined by 32.35 points or 0.38% to 8,555.90.

The BSE Sensex touched a high and a low of 28809.64 and 28538.44, respectively. The BSE Mid cap index was down by 0.08%, while the Small cap index was down by 0.72%.

The top gainers on the Sensex were Hero MotoCorp up by 3.69%, Hindustan Unilever up by 2.75%, TCS up by 1.89%, Axis Bank up by 1.73% and Maruti Suzuki up by 1.61%. On the flip side, ONGC down by 3.98%, Hindalco down by 3.85%, BHEL down by 3.25%, Reliance Industries down by 2.94% and Tata Power down by 2.53%.

On the BSE Sectoral front Consumer Durables up by 3.31%, IT up by 0.84%, FMCG up by 0.69%, TECK up by 0.46% and Auto up by 0.33% were the top gainers, while Oil & Gas down by 2.57%, Power down by 2.25%, Metal down by 2.14%, PSU down by 1.62% and Capital Goods down by 1.37% were the top losers in the space.

Meanwhile, fuelling recovery hopes in Asia’s third-largest economy, business activity in Indian manufacturing sector expanded in the month of July on the back of solid inflow of new orders which have driven the manufacturing firms to scaled up production. The HSBC Manufacturing Purchasing Managers’ Index (PMI), a headline index designed to measure the overall health of the manufacturing sector, jumped to 21-month high at 53.3 in the month of November from 51.6 in the previous month’ October. The latest reading signaled a solid improvement in business conditions and remained above the crucial 50 mark for the thirteen consecutive months that separates growth from contraction. However, a cautionary note was provided as the survey indicated that inflationary pressures intensified in November suggesting that RBI should remain vigilant about lowering interest rates.

The Survey further highlighted stronger-than expected demand, as new order growth accelerated to the quickest in 21 months. New export orders also continued to grow in November, although the pace slightly faltered from October. Among the monitored sub-sectors, consumer goods remained best performing sector. Manufacturers reported that stronger order books and higher production requirements fuelled further expansions in purchasing activity and pre-production inventories in October. Subsequently, stocks of inputs expanded for the sixth month running, and post-production inventories also rose during the month albeit marginally. Despite accelerated expansions in output and new business, employment in the Indian manufacturing, economy remained broadly unchanged in November.

On inflation front, the HSBC survey indicated high inflationary pressure as manufactures paid higher prices for metals, chemicals and energy. Among the surveyed sub-sectors, the sharpest increase in purchases' prices was witnessed in intermediate goods and accordingly, manufacturers also increased their output prices. The rate of charge inflation picked up to the quickest in five months, suggesting that inflation may increase in coming months.

The CNX Nifty touched a high and low of 8,623.00 and 8,545.15 respectively.

The top gainers on Nifty were Asian Paints up by 7.29%, Hero MotoCorp up by 3.79%, DLF up by 3.52%, IndusInd Bank up by 2.88% and Hindustan Unilever up by 2.75%.

On the flip side, Jindal Steel & Power down by 4.05%, NMDC down by 3.97%, ONGC down by 3.74%, Hindalco Industries down by 3.45% and BHEL down by 3.38% were the top losers.

European markets were trading in red, Germany’s DAX was down up by 0.37%, United Kingdom’s FTSE 100 was down by 0.74% and France’s CAC 40 was down by 0.56%.

Asian markets ended mostly in red on Monday as the oil prices extended last week's slump and a gauge of Chinese manufacturing declined, adding to concerns about global economic recovery. The Chinese Shanghai Composite edged down marginally on growth concerns after data suggested the economy is under significant downward pressure. However, the losses were restricted following the central bank published draft rules for a long-awaited bank deposit insurance scheme. The Chinese manufacturing gauge fell as factory shutdowns aggravated a pullback in the economy, raising pressure on the central bank to ease policy further after it lowered interest rates for the first time in two years. The Japanese stocks rallied hitting a fresh seven-year high, with a weaker yen and encouraging data on capital spending by Japanese companies.