Indian equities slip to day’s lows; gains in Auto and Capital Goods cap losses

Indian equity markets are displaying subdued trends in the Wednesday afternoon trades as investors chose to take some profits off the table after the recent sharp rally in equities. Sluggish global cues have kept domestic market participants cautious which is evident since the frontline indices are moving in a tight range in the session. Though the key gauges have not succeeded in moving above the previous closing levels for far, however, the psychological 17,050 (Sensex) and 5,150 (Nifty) levels proved as strong supports for the indices. Profit booking was largely evident in the high beta Real Estate stocks which plunged over a percent followed by the information technology counters which too traded with similar amount of losses. However, the encouraging monthly sales numbers by auto majors like Mahindra & Mahindra, TVS Motors and Maruti Suzuki kept the rate sensitive automobile counter buzzing. Apart from the gains in Auto pocket, the Capital goods counter too gained traction and prevented the benchmarks from drifting below the psychological levels. Meanwhile, the overwhelming manufacturing PMI numbers which showed Indian manufacturing sector business conditions improved at fastest rate in eight months were outweighed by reports that India's trade deficit widened in December to $12.7 billion from $8.0 billion a year earlier as export growth slowed due to falling global demand. On the global front, weaker than expected economic reports from the US along with unconvincing Chinese manufacturing PMI data kept global investors away from building fresh positions. The Asian markets exhibited mixed trends while European futures signaled that the markets there would start on a flat note.

Moreover, the broader markets too traded on positive note with around half a percent gains and comprehensively outclassed their larger peers. The bourses declined on good volumes of around Rs 0.50 lakh crore while market breadth on BSE was in favor of advances in the ratio of 1499:1036 while 105 scrips remained unchanged.

The BSE Sensex is currently trading at 17,102.84 down by 90.71 points or 0.53% after trading as high as 17,210.16 and as low as 17,061.55. There were 12 stocks advancing against 18 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index rose 0.41% and Small cap climbed 0.80%.

On the BSE sectoral space, Auto up 1.91%, Capital Goods up 0.55% and Power up 0.31% were the only gainers while Consumer Durables down 2.01%, Realty down 1.35%, IT down 1.14%, TECk down 1.11%, Bankex down 1.08% were the major losers in the space.

Hero Moto up 3.41%, Tata Power up 2.84%, M&M up 2.78%, Maruti up 2.37% and Jindal up 2.25% were the major gainers on the Sensex, while Coal India down 2.87%, DLF down 2.39%, ONGC down 2.12%, ICICI Bank down 2.06% and HDFC down 2.02% were the major losers in the index.

Even as most developed nations continued to struggle, industrial activity in India resiliently expanded at a brisk pace in the month of January with manufacturing sector business conditions improving at fastest rate in eight months. The manufacturing sector continued to gain momentum as demand from both domestic and foreign clients increased, underscoring the fact that sentiments have improved in recent months. With the sharp increase in both new orders and output, purchasing activity too saw substantial rise during the month.

According to the HSBC purchasing managers’ index (PMI), the manufacturing sector expanded to 57.5 in January, 2012 as against 54.2 in the previous month of 2011. A figure above 50 signals increase in production while, a number below 50 indicates contraction. The factory sector growth in the month was faster than the long-run series average. The PMI reading, which measures the overall health of manufacturing sector, suggested that factory activity saw strongest improvement in business conditions since May 2011.

After expanding at a swift pace in the last month of 2011, the momentum in industrial activity has accelerated further thanks to general improvement in demand and market conditions which resulted in rise in new order volumes. The factory output sub-index soared to 62.9 in January as against 55.8 in the previous month while both the output and the new orders indexes climbed to their highest levels since May last year. Though, growth of new export business also quickened but difficult economic conditions and increased competition in some markets, capped gains in new export orders.

Besides, manufacturing sector employment remained largely unchanged around December levels when it rose after four straight months of showing job losses. However, much to the dismay of the sector, the rate of input cost inflation increased substantially during January driven up by higher raw material costs. The rate of increase was faster than in December and it remained stubbornly above the long-run series average.

Meanwhile, a month after keeping the key policy rates unchanged, the first time since March 2010, the Reserve Bank of India (RBI), has once again left the repo and reverse repo rates untouched at 8.5% and 7.5% respectively. However, the Indian central bank has pulled out a rabbit from the hat as it decided to cut the cash reserve ratio to 5.5% from 6% which underscores a cut of 50 basis points.  The RBI governor though, was of the belief that it is premature to start reducing policy rates in favor of economic growth just yet as inflation continues to hover at uncomfortable levels.

The S&P CNX Nifty is currently trading at 5,172.50, lower by 26.75 points or 0.51% after trading as high as 5,198.35 and as low as 5,159.00. There were 21 stocks advancing against 29 declines on the index.

The top gainers on the Nifty were Hero Moto up 3.47%, Tata Power up 2.89%, M&M up 2.83%, Maruti up 2.46% and Jindal Steel up 2.45%.

Coal India down 3.22%, DLF down 2.50%, Sesa Goa down 2.25%, BPCL down 2.25% and ONGC down 2.23% were the major losers on the index.

In the Asian space, Jakarta Composite rose by 0.01%, Nikkei 225 rose 0.08%, Seoul Composite advanced 0.18% and Taiwan Weighted climbed 0.43%.

On the flipside Shanghai Composite plunged 1.12%, Hang Seng declined 0.42% and Strait Times eased 0.68%.