Benchmarks tread water ahead of RBI credit policy

Indian equity benchmarks have made a positive start and are managed to keep their head above water ahead of the Reserve Bank of India (RBI) credit policy which is due to be announced later today. RBI governor Raghuram Rajan had already cut the repo rate, or the key lending rate, to 7.75 percent, the first rate cut in his tenure. Though, there is build-up of expectations for yet another round of rate cut but RBI governor may not oblige so soon, but any kind of surprise can give markets the direction. Some support came in from report that foreign institutional investors remained net sellers in equities after they sold equities worth Rs 630 crore on February 2, as per the provisional stock exchange data.

On the global front, the US markets despite weak economic data surged in last session and ended at their almost day’s high. The gains were partly due to a notable increase by the price of crude oil, however, purchasing managers’ index fell to 53.5 in January from 55.1 in December, its lowest in one year. However, the Asian markets were trading mostly in the red at this point of time weighed down by weak US economic data, though some indices in the region are marginally in green.

Back home, on the sectoral front, consumer durables, oil and gas and fast moving consumer goods witnessed the maximum gain in trade, while realty, software and technology remained the top losers on the BSE sectoral space. The broader indices too were trading lightly in the green, while the market breadth on the BSE was positive; there were 1175 shares on the gaining side against 705 shares on the losing side while 60 shares remain unchanged.

The BSE Sensex is currently trading at 29130.44, up by 8.17 points or 0.03% after trading in a range of 29124.61 and 29253.06. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.33%, while Small cap index up by 0.29%.

The gaining sectoral indices on the BSE were Consumer Durables up by 1.84%, Oil & Gas up by 1.27%, FMCG up by 1.04%, PSU up by 0.40% and Auto up by 0.34% while, Realty down by 0.66%, IT down by 0.58%, TECK down by 0.29%, Bankex down by 0.28% and Power down by 0.14% were the losing indices on BSE.

The top gainers on the Sensex were Sesa Sterlite up by 1.74%, Reliance Industries up by 1.73%, Hindustan Unilever up by 1.59%, ONGC up by 1.44% and Bharti Airtel up by 1.34%. On the flip side, Bajaj Auto down by 2.67%, Dr. Reddys Lab down by 1.42%, HDFC down by 1.27%, HDFC Bank down by 1.18% and Hindalco down by 1.10% were the top losers.

Meanwhile, raising hopes of a rate cut by the Reserve Bank of India (RBI), Indian manufacturing activity retreated from two year high in January on slower pace of order flows from domestic and global markets. The HSBC India Purchasing Managers' Index (PMI), a headline index designed to measure the overall health of the manufacturing sector, slid to three month low at 52.9 in January, down from 54.5 in the prior month. Notably, despite falling, the index remained consistent with a solid improvement in business conditions in January. Moreover, the latest expansion was the fifteenth in as many months since the index has been higher above the watershed 50 mark, which denotes growth since November 2013.

The latest survey points that business conditions although have improved at a solid rate albeit more slowly than in the previous month. The overall improvement in the Indian manufacturing sector has been underlined by further output growth in January. Production has risen at a robust pace, extending the current sequence of expansion to 15 months.

Amid reports of improving demand, latest data indicated that new orders increased for the fifteenth successive month in January. However, having accelerated to the highest since April 2011 in the previous month, the growth of new export business moderated in January. A sub index covering new orders fell to 54.4 from 57.9 in December on weaker international demand since one of India’s main export destination, the euro zone is struggling to revive its economy and battling disinflation. Among the monitored sub-sectors, by far the sharpest rise occurred in consumer goods.

On the price front, lower prices paid for metals, chemicals, plastics and energy led to the weakest rise in input costs in the current 70-month period of inflation. As a result, output charges rose only fractionally during the month. Meanwhile, growth of output and new business continued to have little impact on employment in January, as workforce numbers rose only marginally during the month.

Lastly, in an encouraging development, the report indicated of RBI slashing interest rates by 75 basis points in the first half of 2015 on account of sluggish growth and falling inflation. The Reserve Bank of India, which last month announced a surprise rate cut of 25 basis points after maintaining a hawkish monetary stance for 20 months, is scheduled to undertake its sixth bi-monthly monetary policy review, 2014-15 on Tuesday, February 3.

The CNX Nifty is currently trading at 8803.50, up by 6.10 points or 0.07% after trading in a range of 8802.55 and 8837.30. There were 28 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were Cairn India up by 2.21%, Sesa Sterlite up by 1.74%, Reliance Industries up by 1.72%, Ultratech Cement up by 1.72% and Hindustan Unilever up by 1.66%. On the flip side, Bajaj Auto down by 2.72%, Dr. Reddys Lab down by 1.49%, HDFC down by 1.32%, Kotak Mahindra Bank down by 1.17% and Infosys down by 1.08% were the top losers.

Asian markets were trading mostly in the red; Nikkei 225 decreased 154.09 points or 0.88% to 17,403.95, Hang Seng slipped 77.82 points or 0.32% to 24,406.92, Straits Times shed 15.82 points or 0.46% to 3,407.53, KOSPI Index dipped 4.46 points or 0.23% to 1,948.22 and FTSE Bursa Malaysia KLCI was down by 0.92 points or 0.05% to 1,781.26.

On the flip side, Shanghai Composite increased 13.1 points or 0.42% to 3,141.40, Jakarta Composite rose 20.81 points or 0.39% to 5,297.05 and Taiwan Weighted was up by 53.95 points or 0.57% to 9,440.94.