Benchmarks resume northward journey; Nifty reclaims 8,550 mark

Resuming their northward journey, Indian equity benchmarks ended the Wednesday’s trade with a gain of over half a percent with frontline gauges recapturing their crucial 8,550 (Nifty) and 28,200 (Sensex) levels. Markets after a gap-up opening traded in a very tight-band throughout the session, though mild profit booking was witnessed in last leg of trade. Sentiment remained up-beat on report that the central bank retained its growth forecast of 7.6% for the financial year ending March 2016, citing a gradually improving outlook on the back of better real income from the decline in commodity prices and likelihood of better agricultural income if the monsoon continues to improve.

Some support also came with report that the Indian services industry bouncing back to growth in July, although the rate of expansion was only marginal, the seasonally adjusted Nikkei Services Business Activity Index rose back above the 50.0 no-change mark in July, posting 50.8 from 47.7 in June. Foreign traders were encouraged on some reports that as per the recommendations of Justice AP Shah-led three-member committee on minimum alternative tax (MAT), foreign investor is not liable to pay MAT prior to April 1, 2015.

Global cues too remained supportive with European counters making a firm start and CAC, DAX and FTSE were trading higher in early deals, following a slew of positive data and earnings and rising expectations that the U.S. Federal Reserve will become the first major central bank to raise rates. Asian markets ended mostly in green as a private survey showed China’s services sector grew at its fastest pace in almost a year in July.

Back home, sentiment got boost on reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 118.70 crore on August 4, 2015, as per provisional data released by the stock exchanges. Better-than-expected Q1 earnings by Bharti Airtel buoyed the sentiment. The company has reported 40.22% rise in its consolidated net profit after minority interest of Rs 1554.30 crore for the quarter ended June 30, 2015 as compared to Rs 1108.50 crore for the same quarter in the previous year.

Stocks related to metal counter remained on buyers’ radar on reports that the government might impose import duty on long products and flat steel products to counter huge imports from China. IT stocks gained momentum on the back of a weakening rupee. Additionally, sugar companies too gained as government has made it compulsory for sugar mills to export millions of tonnes of surplus supplies to support local prices.

The NSE’s 50-share broadly followed index Nifty gained over fifty points to end above the psychological 8,550 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex rose by around one hundred and fifty points to end above the psychological 28,200. Broader markets too traded with traction and ended the session with a gain of around a percent. The market breadth remained in favour of advances, as there were 1,803 shares on the gaining side against 1,152 shares on the losing side while 108 shares remain unchanged.

Finally, the BSE Sensex surged by 115.15 points or 0.54% to 28223.08, while the CNX Nifty gained 51.05 points or 0.60% to 8567.95.

The BSE Sensex touched a high and a low 28315.71 and 28135.68, respectively. The BSE Mid cap index was up by 0.76%, while Small cap index was up by 0.96%.

The top gaining sectoral indices on the BSE were Realty up by 3.31%, IT up by 1.78%, Healthcare up by 1.55%, TECK up by 1.53% and FMCG up by 1.41%, while Bankex down by 0.33%, PSU down by 0.09%, Metal down by 0.04% and Consumer Durables down by 0.03% were the losing indices on BSE.

The top gainers on the Sensex were Wipro up by 2.94%, Infosys up by 2.52%, Bajaj Auto up by 2.36%, Tata Steel up by 2.28% and Lupin up by 2.08%. On the flip side, Tata Motors down by 1.10%, Coal India down by 1.08%, SBI down by 0.99%, ICICI Bank down by 0.96% and Hindalco down by 0.91% were the top losers.

Meanwhile, the Indian services industry bounced back to growth in July, although the rate of expansion was only marginal, the seasonally adjusted Nikkei Services Business Activity Index rose back above the 50.0 no-change mark in July, posting 50.8 from 47.7 in June. The seasonally adjusted Nikkei India Composite PMI Output Index too climbed to 52.0 from 49.2 in June to signal a modest increase in activity, helped by a first rise in services activity in three months and acceleration in the rate of manufacturing production growth. Growth has now been recorded in 14 of the past 15 months.

As per the survey response, services activity rose primarily in response to a renewed increase in new business, with panelists commenting on strengthening demand conditions. Although growing for the first time in three months, the expansion in new business was slight.

The upturn in incoming new work led Indian service providers to take on additional workers in July. Although slight, the rate of job creation was the quickest in two years. Increased employment led services outstanding business to decline for the first time since February 2014.Inflationary pressures remained muted during the month, with companies actually raising their output prices at a slower pace than in June. Although, input prices rose only modestly overall, but there were reports from services panellists that fuel, transportation and staff salaries had contributed to the latest increase in cost burdens.

The survey also noted that services output prices rose, extending the current sequence of charge inflation to eight months. Nonetheless, the latest increase was only marginal and the confidence among Indian services firms deteriorated in July. Though companies remained optimistic (on average), the level of positive sentiment dipped to a survey low.

The CNX Nifty touched a high and low 8,591.85 and 8,545.85 respectively.

The top gainers on Nifty were Infosys up by 2.78%, Zee Entertainment up by 2.58%, Bajaj Auto up by 2.56%, Wipro up by 2.55% and Lupin up by 2.47%. On the flip side, Bank of Baroda down by 1.36%, Coal India down by 1.29%, Yes Bank down by 1.27%, SBI down by 1.26% and Tata Motors down by 1.25%, were the top losers.

European Markets were trading in the green; UK's FTSE was up by 0.28% France’s CAC was up by 1.14% and Germany’s DAX was up by 1.20%.

Asian markets, barring Shanghai Composite, closed in green on Wednesday. An economic adviser to Japan’s Prime Minister stated that he saw no need for the Bank of Japan to deploy additional stimulus to meet its 2% inflation goal next year, warning that it could cause the yen to weaken and prices to overshoot. Etsuro Honda, special adviser to the Cabinet and a leading architect of Prime Minister Shinzo Abe’s reflationary economic policy, added that the next step for the central bank could be to taper its massive asset purchases. Activity in China’s services sector expanded at its fastest pace in 11 months in July, thanks to stronger new business, a welcome development at a time factories in the world’s second largest economy are struggling. The services Purchasing Managers’ Index (PMI) compiled by Caixin/Markit rose to 53.8 from June’s 51.8. The July level is the highest since August 2014 and marks a 12th straight month of expansion. A sub-index measuring new business jumped to 54.0 from June’s 52.2 while the employment sub-index also edged up, indicating increased hiring on stronger new businesses. Indonesian GDP fell to a seasonally adjusted annual rate of 4.67%, from 4.71% in the preceding month. Malaysian Trade Balance rose to 7.98B, from 5.50B in the preceding month. Taiwanese CPI rose to a seasonally adjusted annual rate of 0.66%, from -0.56% in the preceding quarter.