Benchmarks end higher on decent macro economic data

Monday’s session turned out to be a good day of trade for the Indian equity markets, where frontline gauges garnered gains of around half a percent. Markets after a initial hiccups gained ground and traded in fine fettle to end above their crucial 26,550 (Sensex) and 8,000 (Nifty) bastions. Sentiment was buoyed as the wholesale price index (WPI) based inflation for May 2015 contracted 2.36%, the seventh straight month of decline, as compared to a contraction of 2.65% in the previous month with food articles inflation quoting at 3.8% against 5.73% last month. Sentiments also remained up-beat on expectations that above-average monsoon rain will improve the odds for further monetary policy easing from Reserve Bank of India (RBI).

Moreover, traders rejoiced upbeat domestic economic data of strong Index of Industrial Production (IIP) and steady Consumer Price Index (CPI) numbers released on Friday after the market hours. IIP increased by 4.1% in April, against a growth of 2.8% a year ago and 2.5% in March this year on the back of 5.1% growth in manufacturing and 11.1% expansion in capital goods, while CPI rose from 4.87% in April to 5.01 in May on the back a poor monsoon.

On the global front, European counters were trading in red terrain in early deals on Monday led by Greece. The latest failure to find a compromise to unlock as much as 7.2 billion euros in aid for Greece’s anti-austerity government was accompanied by warnings about the risk of the country’s exit from the 19-nation euro. Asian markets ended in red amid concerns of a possible Greek default. Investors also remained watchful of the FOMC meeting, which is scheduled this week and will likely decide the timeframe for a Fed rate hike.

Back home, some support came with report that the finance ministry has loosened the purse strings and asked ministries and departments to start spending with focus on capital expenditure as it looks to lift growth with private sector investment yet to get underway. The key areas are roads and shipping along with rural development and agriculture. Meanwhile, the FDI inflows into the services sector grew by over 46 per cent to $ 3.25 billion in 2014-15 as compared to $ 2.22 billion in 2013-14.

Buying in capital goods space mainly aided the sentiments, after IIP data showed sector’s growth surged to 11.1 percent in April indicating an uptick in demand. Shares of public sector oil marketing companies (OMCs) edged higher on lower global crude oil prices. However, banking related stocks edged lower despite public banks and private sector banks unanimously expressing at a meeting between Finance Minister Arun Jaitley that in a period of 2-3 months, greater transmission of lower rates by commercial banks could be seen, while Finance Minister Arun Jaitley promised more capital infusion into public sector banks. 

The NSE’s 50-share broadly followed index Nifty rose by over thirty points and ended above the psychological 8,000 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by over one hundred and sixty points to finish above the psychological 26.550 mark. Broader markets struggled to get any traction and ended the session mixed. The market breadth remained in favor of advances, as there were 1,440 shares on the gaining side against 1,207 shares on the losing side while 141 shares remain unchanged.

Finally, the BSE Sensex surged by 161.25 points or 0.61% to 26586.55, while the CNX Nifty gained 31.00 points or 0.39% to 8013.90.

The BSE Sensex touched a high and a low of 26728.60 and 26307.84, respectively. The BSE Mid cap index was down by 0.01%, while Small cap index up by 0.42%.

The gaining sectoral indices on the BSE were Auto up by 1.12%, Healthcare up by 0.96%, Oil & Gas up by 0.87%, TECK up by 0.54% and Capital Goods up by 0.46%, while, Consumer Durables down by 0.83%, Metal down by 0.62%, Power down by 0.48% and Bankex down by 0.40% were the losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 2.95%, Mahindra & Mahindra up by 2.36%, Bajaj Auto up by 2.13%, HDFC up by 2.07% and Reliance Industries up by 1.33%. On the flip side, Hindalco down by 1.97%, Vedanta down by 1.49%, SBI down by 1.34%, Tata Power down by 0.69% and NTPC down by 0.66% were the top losers.

Meanwhile, giving a light of hope to the Public Sector Bank (PSU), the Finance Minister Arun Jaitley has promised more capital infusion into public sector banks, saying there's “merit” in their demand for more funds over and above what was provided in the Budget. He further added that 'Banks have made a strong case for additional capital... And over the next few months, this is something the government is going to seriously look at. The Minister also said that banks are free to take decision on tapping the market at an opportune time taking into account the market conditions and stability.

The government has earmarked Rs 7,940 crore in the Budget for recapitalisation of PSU banks for the current fiscal. Last fiscal, the government infused Rs 6,990 crore in nine public sector banks based on their performance.

The issue of additional capital requirement was also flagged by the Reserve Bank in view of mounting bad loans and support growth. RBI Deputy Governor S S Mundra had said the Budget amount marked for recapitalisation of PSU banks is not adequate and RBI has asked the Finance Ministry to raise the quantum of assistance in view of mounting bad loans and support growth.

Meanwhile, the Finance Ministry is likely to finalise additional capital requirement, over and above budget provision, for public sector banks in the next three months and the exercise of getting representations from individual banks for additional capital requirement would be completed by first week of July.

The CNX Nifty touched a high and low of 8,057.70 and 7,944.85 respectively.

The top gainers on Nifty were Idea Cellular up by 3.20%, Cairn India up by 3.18%, Sun Pharma up by 2.89%, Mahindra & Mahindra up by 2.68% and Infosys up by 2.18%. On the flip side, Power Grid down by 2.85%, Bank of Baroda down by 2.55%, Hindalco down by 2.44%, ACC down by 2.37%, and Indusind Bank down by 2.15% were the top losers.

European Markets were trading in the red; Germany's DAX declined by 1.70%, UK's FTSE slipped 0.89% and France's CAC was down by 1.31%.

Asian markets closed in red on Monday, on concerns about Greece’s future in the euro zone after debt reform talks between Athens and its creditors collapsed at the weekend. The Bank of Japan remains on course to expand its monetary stimulus in October, but some marketmen have pushed back their forecasts for more easing after recent upbeat data suggested the economy was gaining speed. Japan’s output gap narrowed in January-March, according to calculations based on revised gross domestic product data, in an encouraging sign for the Bank of Japan’s inflation target. The output gap in the first quarter was minus 1.6 percent. That compares with a minus 2.4 percent gap in the fourth quarter of last year. Japanese tertiary industry activity index fell to a seasonally adjusted -0.2%, from -1.0% in the preceding month. Indonesia posted a surprisingly strong May trade surplus but also another sharp drop in imports, which could reflect weak consumer demand ahead of the Muslim fasting month of Ramadan. There was a trade surplus of $950 million, the sixth straight surplus and more than double expectations, evidence that the current account deficit should narrow in the second quarter. A large current account deficit has been one of Indonesia’s top economic problems and at times has pressured the rupiah, which is emerging Asia’s weakest currency this year.