Benchmarks trade slightly in red in early deals

Indian equity benchmarks have made a cautious start and are trading slightly in the red in early deals on Tuesday as investors opted to book some of their profit after a huge rally in previous session. Sentiments also remained down-beat on a private report that the level of optimism about business environment among chief financial officers in the country declined in April-June period largely owing to slower pace of reforms than initially expected and weak profit level of the corporates. Also, marketmen were eyeing the development in the parliament where the Rajya Sabha is likely to see a heated debate over the Real Estate Regulatory Authority Bill that is listed for consideration today. The main opposition Congress has said that it will oppose the bill strenuously as it is anti-home buyer and pro builder.

On the global front, the US markets moved higher in last session supported by biggest gain in US factory orders in eight months, though major averages ended well off their best levels of the day with monthly jobs report due on Friday in spotlight. The Asian markets were trading mostly in the red at this point of time.

Back home, on the sectoral front, realty, capital goods and metal witnessed the maximum gain in trade, while power, infrastructure and FMCG remained the top losers on the BSE sectoral space. The broader indices, however, were outperforming benchmarks, while the market breadth on the BSE was positive; there were 1071 shares on the gaining side against 743 shares on the losing side while 67 shares remain unchanged.

The BSE Sensex is currently trading at 27456.97, down by 33.62 points or 0.12% after trading in a range of 27402.94 and 27603.71. There were 12 stocks advancing against 18 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.35%, while Small cap index gained 0.39%.

The top gaining sectoral indices on the BSE were Realty up by 1.43%, Capital Goods up by 0.95%, Metal up by 0.75%, Consumer Durables up by 0.24% and IT up by 0.19% while, Power down by 0.51%, INFRA down by 0.28%, FMCG down by 0.18%, Auto down by 0.06% and TECK down by 0.01% were the losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 3.24%, TCS up by 1.82%, Larsen & Toubro up by 1.75%, ONGC up by 1.63% and Hindustan Unilever up by 1.39%. On the flip side, Bajaj Auto down by 1.81%, Bharti Airtel down by 1.49%, Coal India down by 1.49%, Cipla down by 1.45% and Mahindra & Mahindra down by 1.44% were the top losers.

Meanwhile, following the solid readings seen in March, the Indian manufacturing economy recorded a growth slowdown during April on account of weaker pace of total new orders which led to companies reduce their staffing level and raising output to a lesser degree. Also, Job losses were reported for the second time in the year-to-date.

The headline HSBC India Purchasing Managers’ Index (PMI), compiled by Markit, although slowed to 51.3 in April from 52.1 in March, marked its eighteen month of expansion since a figure above 50 indicates that the sector is expanding, while a figure below that level means contraction. The slow expansion space of manufacturing companies came despite manufacturers reducing the selling price for the first time since May 2013.

The companies reduced these prices on the weaker rise in the cost of raw materials, despite this failed to attract new orders. Notably, an index monitoring new business, which highlights underlying demand, fell to 51.9 in april from 53.2, firms also reduced staffing levels last month.

However, demand from external markets remained strong, as the level of new export orders increased at a solid pace that was unchanged since the prior month, with companies reporting greater inflows of new business from key export clients, but in particular from those operating in Asia.

On the inflation front, input prices continued to rise in April, albeit at a slight and weaker rate, while the manufacturers slashed selling price in an attempt to secure new contracts. However, the rate of reduction was marginal overall. Lower factory gate prices were signalled by consumer and intermediate goods producers, whereas investment goods firms reported a rise in their output charges.

Thus, falling inflation and slowing manufacturing industry makes a strong case for India’s central bank to reduce their interest rates soon from the current 7.5%. Only lower interest rates and long waited economic reforms could spur the economic growth further.

The CNX Nifty is currently trading at 8316.40, down by 15.55 points or 0.19% after trading in a range of 8299.20 and 8344.05. There were 20 stocks advancing against 30 stocks declining on the index.

The top gainers on Nifty were Tata Steel up by 3.24%, Larsen & Toubro up by 1.90%, TCS up by 1.72%, ONGC up by 1.40% and Hindalco up by 1.31%. On the flip side, Cairn India down by 1.73%, Zee Entertainment down by 1.70%, Bajaj Auto down by 1.70%, ITC down by 1.67% and Bharti Airtel down by 1.65% were the top losers.

Most of the Asian equity indices were trading in the red; Hang Seng decreased 282.53 points or 1% to 27,841.29, Shanghai Composite dropped 82.3 points or 1.84% to 4,398.16, Taiwan Weighted shed 44.97 points or 0.46% to 9,800.07 and Straits Times was down by 13.39 points or 0.38% to 3,469.31. on the flip side, Jakarta Composite increased 1.91 points or 0.04% to 5,143.05 and FTSE Bursa Malaysia KLCI was up by 4.11 points or 0.23% to 1,822.38.