Markets continue to trade flat as euphoria over rate cut hopes fizzles out

After giving up early gains, local equity markets continued trading flat as early euphoria over rate cut hopes over softer CPI and lower IIP data got fizzled out by afternoon. On the macro-front, easing to four month low, Retail inflation, as measured by the consumer price index (CPI), slowed to 4.87% year-on-year in April, lower compared to 5.17% in March, while 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. Nevertheless, positive global set-up prevented any slide of local equities. Managing to hold their neck in green, both Sensex and Nifty were trading above crucial 26850 and 8,100 levels respectively. Meanwhile, broader indices outperforming larger counterparts were trading with gains in the range of 0.30-0.95%.

On the global front, Asian shares firmed up on Wednesday, 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 is set to release official data on April industrial production, as well as retail sales figures for last month and fixed investment later in the day.

Closer home, most of the sectoral indices on BSE were holding into positive territory, nevertheless stocks from banking, Capital Goods and Auto counters were the prominent gainers of the session. On the flip side, massive drubbing was witnessed in stocks from Realty, Metal and technology counters. Rate cut hopes mainly lifted the rate sensitive auto and banking stocks higher. The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1321:685; while 51 shares remained unchanged.

The BSE Sensex is currently trading at 26875.47, down by 2.01 points or 0.01% after trading in a range of 26750.01 and 27299.80. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.99%, while Small cap index up by 0.34%.

The top gaining sectoral indices on the BSE were Bankex up by 0.76%, Capital Goods up by 0.74%, Auto up by 0.67%, INFRA up by 0.56%, Consumer Durables up by 0.36% while, Realty down by 0.92%, Metal down by 0.61%, TECK down by 0.38%, IT down by 0.30%, FMCG down by 0.18% were the losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 3.14%, Axis Bank up by 2.19%, Mahindra & Mahindra up by 1.92%, Hero MotoCorp up by 1.52% and Larsen & Toubro up by 0.89%. On the flip side, NTPC down by 3.67%, Hindalco down by 3.24%, Bharti Airtel down by 1.97%, Hindustan Unilever down by 1.81% and Vedanta down by 1.47% were the top losers.

Meanwhile, in not so encouraging development for the economy, global rating agency, Moody’s Investor Service has stated that monsoon failure and global financial volatility could pose additional risks to India's growth this year, despite this it expects the growth likely to average around 7.5% over the next 18-24 months due to improvement in business environment induced by reforms. The recent reforms efforts from India’s central bank include inflation targeting framework, regulatory simplification, increase in limits for foreign direct investment in rail infrastructure, defence and insurance sectors, among others.

Further, Moody’s in its report highlighted that the current economic conditions in India was reflective of both global and domestic factors, including weak domestic credit conditions, tepid local demand and uncertain global growth. The report further noted that India’s structural reform efforts would revive domestic investment and competitiveness, but over the medium and not the near term.

The report cautioned that US fed decision of hiking rates by June or September could trigger a flight of capital from emerging markets, including India, and result in financial volatility. It added that India’s monsoon for the second consecutive year were likely to be below normal in the current year  at 93%, as parts of north-west and central India may be the most affected. 

Moody’s highlighted the sustainability of the growth rates for the economy would be depended upon measures taken on infrastructure, regulatory and implementation of bureaucratic reforms front and further cautioned that despite robust growth, India's fiscal metrics were likely to remain weaker than those of similarly rated peers, and that he social, political and economic challenges associated with low average incomes would continue to persist over the medium term.

Nevertheless, the rating agency also listed favourable demographics, a large economy, economic diversity as well as high savings and investment rates as India's structural positives.

The CNX Nifty is currently trading at 8130.35, up by 3.40 points or 0.04% after trading in a range of 8089.80 and 8254.95. There were 32 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 3.24%, Axis Bank up by 2.25%, IDFC up by 1.79%, Mahindra & Mahindra up by 1.78% and Cairn India up by 1.39%. On the flip side, NTPC down by 3.57%, Hindalco down by 3.27%, Bharti Airtel down by 1.92%, Zee Entertainment down by 1.65% and Hindustan Unilever down by 1.53% were the top losers.

Asian markets were trading mostly higher; with FTSE Bursa Malaysia KLCI trading higher by 0.28 points or 0.02% to 1,798.89; Straits Times trading higher by 13.6 points or 0.4% to 3,455.93; KOSPI Index trading higher by 17.39 points or 0.83% to 2,114.16; Jakarta Composite trading higher by 27.09 points or 0.52% to 5,232.70; Taiwan Weighted trading higher by 43.38 points or 0.45% to 9,724.11 and Nikkei 225 trading higher by 139.88 points or 0.71% to 19,764.72.

On the flip side, Hang Seng down by 110.86 points or 0.4% to 27,296.32 and Shanghai Composite down by 31.77 points or 0.72% to 4,369.45 were the only losers amongst Asian pack.