Markets continue to trade in positive territory amid rate cut hopes

Indian equity benchmarks were trading in green in afternoon session amid rate cut hopes after better-than-expected second quarter GDP growth. Though major sectoral indices like metal, oil and gas and power were in red, the sharp buying witnessed in consumer durables and FMCG stocks provided support to the domestic benchmarks and restrained them in positive territory. Sentiments got some support as Finance Minister Arun Jaitley asserted that the government is committed to take more reform measures going forward to take India back to its potential economic growth rate of 8%.  Besides, a mixed trend at other Asian markets, fall in global crude oil prices also influenced sentiments. Broader indices were also trading in green with both mid cap and small cap indices trading up by over 0.10%. Sector wise, shares of paint manufacturer were trading higher by up to 9% on expectation of improvement in operating profit margins due to fall in crude prices. Jewellery stocks were also on buyer radar as the government has eased curbs on gold imports.

Shares of fast moving consumer goods (FMCG) major Hindustan Unilever was trading higher by around 1.5% to Rs 799 as company has indicated that it would be able to manage margin expansion, even with rising excise duties, going forward. Shares of Mangalore Chemicals and Fertilizers has surged nearly 15% to Rs 93.50 after the company said Vijay Mallya, a director on the board of directors of the company, has resigned with immediate effect.

On global front, most of the Asian markets were trading mixed with Nikkei 225 up by 0.7%, while Hang Seng down 1.89%. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 8,500 and 28,500 levels respectively. The market breadth on BSE was positive, out of 2,413 stocks traded, 1,228 stocks advanced, while 1,124 stocks declined on the BSE.

The BSE Sensex is currently trading at 28724.19, up by 30.20 points or 0.11% after trading in a range of 28672.73 and 28809.64. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.28%, while Small cap index up by 0.04%.

The gaining sectoral indices on the BSE were Consumer Durables up by 3.86%, FMCG up by 1.17%, IT up by 0.81%, TECK up by 0.63% and Auto up by 0.43%. On the flip side, Realty down by 1.61%, Metal down by 1.32%, Oil & Gas down by 1.16%, Power down by 1.13% and Capital Goods down by 0.95% were the losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 2.68%, Maruti Suzuki up by 2.01%, Axis Bank up by 1.80%, Hero MotoCorp up by 1.71% and Dr. Reddys Lab up by 1.47%. On the flip side, Sesa Sterlite down by 1.95%, BHEL down by 1.80%, ONGC down by 1.78%, Tata Steel down by 1.75% and Tata Power down by 1.67% were the top losers.

Meanwhile, concerned over the sluggish manufacturing growth, India Inc has pitched for a rate cut by RBI to provide impetus to recovery through higher consumption spending and opening up channels for investment. Dragged down by sluggish manufacturing sector growth, Indian Gross Domestic Product (GDP) growth slowed down to 5.3% y-o-y to 14.39 lakh crore in Q2FY15 as against 5.7% in the previous quarter. Manufacturing sector, having around 75% share in industrial production, was a major dampener with a growth of 0.1% during the second quarter as against the 1.3% registered in the same period of the previous year.

Industry body FICCI has highlighted that though growth in agriculture and services sector is in line with expectations, the subdued growth in manufacturing at 0.1% during quarter is a matter of concern. Interest rate is an important element of the cost structure for manufacturing and given the current inflation situation RBI should ease the monetary policy stance as this would give a boost to investment sentiments. Further, it added that the present wave of optimism needs to be maintained through continued efforts by the government towards further improving the tax and policy environment to encourage enterprises to expand. The Confederation of Indian Industry (CII) stated that there is need for continuing with proactive policies which would help revive investments and address the bottlenecks plaguing the agriculture and industrial sectors. The central bank should review its status quo approach and move towards paring interest rates in its forthcoming monetary policy to give a fillip to recovery.

There is a strong demand from the industry reeling under slowdown to see lower interest rates and is expecting at least 50 basis points cut in the benchmark interest rate by RBI on its bi-monthly monetary policy due on Tuesday. Meanwhile, industry expectations for a rate cut are not unrealistic and based on more than expected decline in the retail inflation which is currently hovering at 5.52 per cent for October, much lower than the RBI target of 8% by January, 2015 and 6% by January, 2016.

The CNX Nifty is currently trading at 8598.75, up by 10.50 points or 0.12% after trading in a range of 8583.50 and 8623.00. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Asian Paints up by 4.87%, Hindustan Unilever up by 2.73%, Axis Bank up by 1.85%, Maruti Suzuki up by 1.61% and TCS up by 1.55%. On the flip side, NMDC down by 2.57%, Jindal Steel & Power down by 2.35%, BHEL down by 2.03%, Sesa Sterlite down by 2.03% and Tata Steel down by 2.00% were the top losers.

Most of the Asian markets were trading mixed, Shanghai Composite up by 4.74 points or 0.18% to 2,687.58, Jakarta Composite up by 6.2 points or 0.12% to 5,156.09 and Nikkei 225 up by 122.84 points or 0.7% to 17,582.69. While, Hang Seng down 453.31 points or 1.89% to 23,534.14, Taiwan Weighted down 69.44 points or 0.76% to 9,117.71, FTSE Bursa Malaysia KLCI down 41.99 points or 2.31% to 1,778.90, Straits Times down 16.71 points or 0.5% to 3,333.79 and KOSPI Index down 15.56 points or 0.79% to 1,965.22