Markets overlook record low April WPI data; trade with loss of over 0.50%

Local equity markets continued in doldrums with losses of over half of a percent on sustained selling activities by funds and retail investors after previous sessions’ splendid gains prompted incremental profit-booking activities amidst mixed global cues. Market-participants largely overlooked lower than expected WPI inflation data, which strengthened the case for RBI lowering its interest rates in its upcoming monetary policy on June 2, preferred cashing in their profits in select blue chip stocks dragging frontline indices, Sensex and Nifty below crucial 27,100 and 8,200 levels respectively. On the macro-front, in a severe disinflationary trend warranting a radical measure, the annual rate of inflation, based on monthly wholesale price index (WPI) ebbed to- 2.65% in April as compared to -2.33% witnessed in March. The number was also way lower than the street expectation of a figure of -2.07% for the month under review. However, the session is productive for broader indices, which outperforming larger counterparts were trading with gains in the range of 0.30-0.45%.

On the global front, Asian markets mostly retreated on Thursday following another set of below-forecast US data, with Tokyo taking the biggest hit as the yen advanced against the dollar. US traders were left disappointed Wednesday after the Commerce Department said retail sales, a key part of consumer spending that drives most of the US economy, stagnated in April after rising 1.1 percent in March.

Closer home, most of the sectoral indices on BSE were trading in negative territory, stocks from Information Technology, banking and Consumer Durables counters were a major drag. On the flip side, stocks from Infrastructure, PSU and oil & gas counters were the prominent gainers of the session. IT stocks declined as the rupee edged higher against the dollar. In stock-specific action, shares of urea makers RCF and fertilizer & Chemicals Travancore traded lower after the Union Cabinet yesterday, 13 May 2015, gave its approval to a comprehensive New Urea Policy 2015 for the next four financial years. The overall market breadth on BSE was in the favour of advances which thumped declines in the ratio of 1214:1127; while 104 shares remained unchanged.

The BSE Sensex is currently trading at 27097.78, down by 153.32 points or 0.56% after trading in a range of 26948.62 and 27293.99. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.37%, while Small cap index up by 0.42%.

The top gaining sectoral indices on the BSE were INFRA up by 0.45%, PSU up by 0.34%, Oil & Gas up by 0.33%, Auto up by 0.22%, Power up by 0.20% while, IT down by 1.09%, TECK down by 0.71%, Bankex down by 0.50%, Consumer Durables down by 0.48%, Capital Goods down by 0.38% were the losing indices on BSE.

The top gainers on the Sensex were Hindalco up by 2.10%, Hero MotoCorp up by 1.41%, Cipla up by 1.36%, Bharti Airtel up by 1.33% and Bajaj Auto up by 1.17%. On the flip side, Vedanta down by 1.93%, Infosys down by 1.48%, Sun Pharma Inds. down by 1.30%, HDFC down by 1.30% and ICICI Bank down by 1.21% were the top losers.

Meanwhile, in the first major downgrade for Indian markets in the past one year, global brokerage HSBC changed its stance on the foreign darling country to 'underweight” from “overweight” on the expectations of corporate earnings remaining muted, monsoon turning weak and growing odds against further rate cuts. It asserted that were little room for further rate cuts and firmly established El Nino conditions were negative for India's rural, agricultural economy. It also noted the incremental potential for more equity outflows as foreign positions looked stretched.

Notably, downgrade comes at a time when Indian markets were facing irk from foreign investors on concerns related to the controversial MAT levy and delay in the ambitious indirect tax (GST) and land reforms.

The global brokerage in its research report termed India as the second most expensive and one of the most over-owned markets in Asia, after a strong rally on the back of reform optimism generated by the Modi government over the past one year. At the same time, HSBC upgraded its stance on markets like The Philippines and Hong Kong “neutral” from “underweight”.

Further, it also highlighted that down-rating was largely in absence of any recovery in India's capex cycle' and further China's policy stimulus which is likely to boost commodity prices also is negative for India.

According to EPFR data, India was the most over-owned equity market in Asia by mutual funds.  And since other markets had become more interesting, India could be used as a funding market. 30 share benchmark index BSE's Sensex, which had peaked above 30,000-points within months of the new government led by Prime Minister Narendra Modi taking over reins last May, has dropped more than 3,000 points from the high. Its gain in the past one year has more than halved to just about 2,000 points.

The CNX Nifty is currently trading at 8186.55, down by 48.90 points or 0.59% after trading in a range of 8137.30 and 8232.80. There were 19 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Asian Paints up by 3.13%, Hindalco up by 2.21%, BPCL up by 1.98%, Hero MotoCorp up by 1.44% and Bharti Airtel up by 1.31%. On the flip side, Lupin down by 3.61%, Vedanta down by 2.11%, Infosys down by 1.54%, HDFC down by 1.37% and Kotak Mahindra Bank down by 1.37% were the top losers.

Asian markets were trading mixed; with FTSE Bursa Malaysia KLCI up by 3.73 points or 0.21% to 1,806.75; KOSPI Index up by 6.17 points or 0.29% to 2,120.33; Shanghai Composite up by 6.54 points or 0.15% to 4,382.30; Jakarta Composite up by 40.52 points or 0.78% to 5,246.13.

On the flip side, Nikkei 225 down by 194.48 points or 0.98% to 19,570.24; Taiwan Weighted down by 113.28 points or 1.16% to 9,610.83; Hang Seng down by 14.78 points or 0.05% to 27,234.50 and Straits Times down by 5.35 points or 0.15% to 3,447.82