Benchmarks continue firm trade in late morning session

Indian equity benchmarks continued to trade firm in late morning session as the Consumer Price Index (CPI) based inflation fell to a four-month low in April and is likely to increase the clamour for the Reserve Bank of India (RBI) to cut interest rates in its next monetary policy. Besides, a firming trend at other Asian markets also triggered buying on domestic bourses. At present, Sensex and Nifty were trading above the crucial 27,200 and 8,200 levels respectively, with gains of over a percentage point. Apart from blue chips, broader indices too equally participated in the rally with both mid cap and small cap indices trading up by 1.76% and 1.22% respectively. Sentiment got a boost with Paris-based think tank OECD saying that India is poised for stable growth even as economic activities are easing in neighbouring and some other developed nations.  However, some investors remained cautious on report that foreign portfolio investors (FPIs) sold shares worth a net Rs 1329.43 crore on May 12, 2015. Overseas investors have sold nearly $2.2 billion worth of cash shares in the last 16 sessions, excluding Japan's Daiichi Sankyo's block sale of Sun Pharmaceutical Industries shares. On the macro-front, the Index of Industrial Production (IIP) numbers slowed to a five month low of 2.1 percent, while the consumer price index in April fell to 4.87 percent from 5.25 percent in March, mainly on account of a fall in the prices of food items.

On global front, Asian shares firmed up in early trade, shrugging off weakness in Wall Street as investors bet that a batch of economic data from China due later in the day would bolster the case for more stimulus in the world's second largest economy. China will release official data on April industrial production as well as retail sales figures for last month and fixed investment. Back home, Indian rupee strengthened by 9 paise to 64.08 against the US dollar in early trade on fresh selling of the American currency by exporters.

Back on street, all the sectoral indices were trading in the positive territory with BSE Banking index leading the rally up 2.08% followed by Auto, Capital Goods and infrastructure indices trading higher over a percentage point. In scrip specific development, shares of Suven Life Sciences have surged on securing Two Product Patents in Europe and Hong Kong.  On the flip side, shares of TV Today Network have dipped after reporting 45% year-on-year (yoy) decline in its standalone net profit at Rs 8.69 crore for the fourth quarter ended March 2015 (Q4), due to higher operational cost.

The market breadth on BSE was positive, out of 2065 stocks traded, 1452 stocks advanced, while 515 stocks declined on the BSE. 

The BSE Sensex is currently trading at 27231.21, up by 353.73 points or 1.32% after trading in a range of 26989.49 and 27299.80. There were 27 stocks advancing against 3 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.76%, while Small cap index up by 1.22%.

The top gaining sectoral indices on the BSE were Bankex up by 2.08%, Auto up by 1.84%, Capital Goods up by 1.68%, Infrastructure up by 1.59% and PSU up by 1.33%, while there were no losers in the space.

The top gainers on the Sensex were GAIL India up by 3.19%, Axis Bank up by 3.16%, Mahindra & Mahindra up by 2.89%, Tata Power up by 2.66% and HDFC up by 2.28%. On the flip side, Hindalco down by 2.51%, NTPC down by 1.52% and Infosys down by 0.04% were the top losers.

Meanwhile, slowing from nine months high level, the index for industrial output (IIP) for the month of March came in at 2.1%, lower than street expectation of a number of around 2.80% and also lower compared to 5% in February. The cumulative growth for the period April-March 2014-15 over the corresponding period of the previous year stood at 2.8%. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of March 2015 stand at 148.5, 209.3 and 176.4 respectively, with the corresponding growth rates of 0.9%, 2.2% and 2.0% as compared to March 2014. The indices for Mining, Manufacturing and Electricity sectors for the month of February 2015 at 2.5%, 5.2% and 5.9%. The cumulative growth in the three sectors during April-March 2014-15 over the corresponding period of 2013-14 has been 1.4%, 2.3% and 8.4% respectively.

As per Use-based classification, the growth rates in March 2015 over March 2014 were 2.3% in Basic goods, 7.6% in Capital goods and 1.9% in Intermediate goods.  The Consumer durables and Consumer non-durables have recorded growth of (-) 4.7% and 1.9% respectively, with the overall growth in Consumer goods being -0.7% v/s 5.2% in the previous month.

This data showed that the secondary sector continues to remain sluggish in volume terms, even overall economic growth is estimated at 7.4% in 2014-15 against 6.9% in 2013-14. Overall economic growth slowed to 5.1% in 2011-12 and further builds pressure on RBI to reduce its key policy rates in its upcoming monetary policy review, which is on June 2. The Reserve Bank of India has cut interest rates twice this year at unscheduled meetings, but kept its key repo rate on hold at 7.50% last meet, waiting to assess inflationary pressures and give commercial banks more time to cut their lending rates.

The government plans to release industrial output data based on a new methodology and use a different base year for calculating the index in the next few months. The industrial output data with “2004/05” as base year has become less relevant now after the government changed the methodology as well as the base year for GDP calculations in February. The revised base year for GDP is “2011/12”.

The CNX Nifty is currently trading at 8236.35, up by 109.40 points or 1.35% after trading in a range of 8153.80 and 8254.95. There were 46 stocks advancing against 4 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 3.22%, Mahindra & Mahindra up by 3.02%, IDFC up by 3.02%, GAIL India up by 3.01% and Yes Bank up by 3.01%. On the flip side, Hindalco down by 3.16%, NTPC down by 1.66%, Zee Entertainment down by 0.86% and Tech Mahindra down by 0.11% were the top losers.

Asian markets were trading mostly in the green; Jakarta Composite increased 0.29%, Straits Times rose 0.38%, KOSPI Index gained 0.63%, Hang Seng advanced 0.15%, Taiwan Weighted surged 0.49% and Nikkei 225 was up by 0.53%. On the flip side, Shanghai Composite decreased 0.15% and FTSE Bursa Malaysia KLCI was down by 0.04%.