Benchmarks extend losses; Nifty hovers near 8,500 mark

Benchmark equity indices after slipping into negative territory have magnified their losses due to weakness in the rate sensitives ahead of the RBI monetary policy as investors remained wary that slowdown of monsoon and rise in inflation data are likely to weigh. Besides, weakness among the global peers on the back of downbeat US economic data and disappointing manufacturing data from China has further hurt the sentiments. Investors remained cautious on the report that Indian Meteorological Department (IMD) retained its seasonal forecast for this year's monsoon rains at 88% of the long-period average (LPA) and warned that showers in August and September will be 84% of LPA.  However, losses remained capped with the report that Federation of Indian Chambers of Commerce and Industry (FICCI), has lauded government’s plan to recapitalise public sector banks (PSU Banks) with infusion of Rs 70,000 crore over the next four years and said that it augurs well for the banking sector and will help fuel economic growth. Meanwhile, after suffering losses on the back of disappointing Chinese manufacturing numbers, metal shares were gaining in early trade on renewed buying interest.

On global front, Asian stocks mostly fell as weak Chinese manufacturing weighed on sentiment and investors looked ahead to a U.S. jobs report later this week that could cement expectations for a Fed interest rate hike. Overnight, US equities markets logged solid losses after manufacturing data from China and U.S. figures released on Monday both disappointed. Back home, Indian rupee depreciated 5 paise to 64.09 against the US dollar in early trade due to appreciation of the American currency overseas.

Back on street, stocks from Metal, Realty and Auto counters were supporting the markets’ uptrend, while those from IT, Consumer Durables and Oil & Gas counters was adding to the underlying cautious undertone. In scrip specific development, shares of Hero MotoCorp have rallied after the company reported a better than expected 33% year-on-year (YoY) jump in net profit at Rs 750 crore for the first quarter ended June 30, 2015. Furthermore, shares of Nilkamal rose after the company's net profit for the quarter ended June 30, 2015 jumped 360% to Rs 25.3 crore compared to Rs 5.5 crore in the corresponding quarter last fiscal.

The market breadth on BSE was positive, out of 2329 stocks traded, 1260 stocks advanced, while 996 stocks declined on the BSE. 

The BSE Sensex is currently trading at 28028.74, down by 158.32 points or 0.56% after trading in a range of 27985.79 and 28264.72. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.33%, while Small cap index up by 0.15%.

The top gaining sectoral indices on the BSE were Metal up by 0.47%, Realty up by 0.37% and Auto up by 0.14%, while IT down by 0.67%, Consumer Durables down by 0.57%, Oil & Gas down by 0.50%, INFRA down by 0.46% and TECK down by 0.43% were the top losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 1.75%, Hindalco up by 1.18%, Tata Steel up by 1.11%, Bharti Airtel up by 0.75% and Bajaj Auto up by 0.54%. On the flip side, GAIL India down by 2.16%, ONGC down by 1.92%, Infosys down by 1.57%, Lupin down by 1.43% and Tata Motors down by 1.38% were the top losers.

Meanwhile, amid growing voices from India Inc for a rate cut because of low wholesale inflation and slowdown in industrial growth, Reserve Bank of India (RBI) will be announcing its Third Bi-monthly Monetary Policy Review, 2015-16. Though there is wide expectation that RBI will keep interest rates unchanged at its policy review, but still there are hopes of another rate cut. During the calender year, RBI has reduced the rate thrice by 0.75 percent. It was cut by 0.25 percent each in January, March and June.

Research firm Moody’s Analytics, a division of Moody’s Corporation, which is engaged in economic research and analysis has said that the Reserve Bank is likely to cut the benchmark rate by 0.25 per cent in its monetary policy review, as inflation is likely to remain subdued on the back of average rainfall and lower commodity prices. On the demand side, though it cautioned that the economic engine has yet to fully fire without key reforms. Thus, private investment has remained on the sidelines.

In its report the firm has said that dim forecasts of below-average rains have not come to fruition and rainfalls have been closer to the long-term average with encouraging signs for kharif crop sowing. Monsoon rainfall has picked up in July and the pace is likely to continue in August.

Moody’s Analytics also said that recent global developments also suggest limits to inflation pressure, with the tumbling of global commodity prices, particularly crude oil, on the back of the Iran nuclear deal. This would help ease RBI's concerns of rising fuel costs. Overall, the subdued inflation profile suggests RBI should lower rates and focus on economic growth.

The CNX Nifty is currently trading at 8505.25, down by 37.80 points or 0.44% after trading in a range of 8489.20 and 8565.15. There were 25 stocks advancing against 25 stocks declining on the index.

The top gainers on Nifty were Asian Paints up by 2.27%, Hero MotoCorp up by 2.10%, BPCL up by 2.00%, Tech Mahindra up by 1.84% and Hindalco up by 1.42%. On the flip side, Cairn India down by 2.42%, GAIL India down by 2.17%, ONGC down by 1.97%, Idea Cellular down by 1.93% and Indusind Bank down by 1.67% were the top losers.

Asian markets were trading Mostly in red; Taiwan Weighted was down by 0.88%, Hang Seng down by 0.13%, FTSE Bursa Malaysia KLCI down by 1.05%, Nikkei 225 down by 0.38%, Jakarta Composite down by 0.28% and Straits Times down by 0.17%. On the flip side, KOSPI Index was up by 0.51% and Shanghai Composite was up by 1.34%.