Benchmarks eke out slender gains; Nifty regains 8,350 mark

Indian equity benchmarks ended the volatile day of trade marginally in green on Thursday as investors opted to buy beaten down but fundamentally strong stocks after four days of continuous drubbing. Markets, after a firm start, traded jubilantly in early deals as some sense of encouragement came with report that India's retail inflation easing to 3.78% in July from 5.40% in June, strengthening the case for an interest rate cut soon. Moreover, the growth in factory output accelerated to 3.8% in June from 2.5% in the previous month. Some support also came with report that a government appointed committee suggested that there was no legal basis to retrospectively impose the controversial minimum alternate tax on foreign investors.

However, marketmen pared most of their gains after a turbulent and largely unproductive monsoon session of Parliament ended this afternoon without legislation including the Goods and Services Tax (GST) proposal being cleared. Sentiments were also weighed down after Indian rupee reversed its gains to slip near the key 65 per dollar mark against the US dollar on the back of unexpected devaluation of yuan. There were bout of volatility witnessed in last leg of trade where markets momentarily dipped into red, however there was some recovery in the final moments and benchmarks managed a close higher by around a quarter percent.

Global cues remained supportive with European counters making a firm start and were trading in gain of around a percent in early deals after China's central bank said there was no basis for further yuan depreciation after a devaluation this week that has seen the currency slide around 4 per cent. All the Asian markets ended in green on Thursday, with investors cautiously watching China’s next move after it allowed the yuan to decline for three straight sessions.

Back home, stocks related to banking counter remained on buyers’ radar as the macroeconomic numbers released yesterday have raised hopes of a rate cut by the RBI in the next monetary policy. On the flip side, metal continued to reel under pressure amid fears that exports to China could be hurt by the devaluation of the yuan. SAIL, Vedanta, NALCO, Jindal Steel, Tata Steel and Hindalco were the major losers from the metal pack. There was some buzz in the telecom stocks, after the government approved the much-awaited spectrum sharing guidelines, which are expected to address the issue of mobile phone call drops and also optimise the use of radio frequency spectrum for telecom services. However, it also said that spectrum sharing would be allowed only for the access service providers in the first instance in a Licensed Service Area (LSA), where both the licensees are having spectrum in the same band.

The NSE’s 50-share broadly followed index Nifty rose marginally by six points to regain its psychological 8,350 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around forty points to finish near the psychological 27,550 mark. Broader markets struggled to get any traction and ended the session with a cut of around half a percent. The market breadth remained in favor of decliners, as there were 1,011 shares on the gaining side against 1,837 shares on the losing side while 99 shares remain unchanged.

Finally, the BSE Sensex gained 37.27 points or 0.14% to 27549.53, while the CNX Nifty added 6.40 points or 0.08% to 8355.85.

The BSE Sensex touched a high and a low 27791.10 and 27496.29, respectively. The BSE Mid cap index was down by 0.23%, while Small cap index was down by 0.83%.

The top gaining sectoral indices on the BSE were Healthcare up by 0.79%, Bankex up by 0.68%, Auto up by 0.43%, PSU up by 0.20% and Infrastructure up by 0.05%, while Metal down by 2.75%, Realty down by 1.44%, Consumer Durables down by 0.97%, TECK down by 0.56% and Capital Goods down by 0.27% were the losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 3.27%, Cipla up by 2.63%, Lupin up by 2.23%, Maruti Suzuki up by 1.59% and Axis Bank up by 1.54%. On the flip side, Vedanta down by 9.26%, Tata Steel down by 6.22%, Hindalco down by 5.21%, Bharti Airtel down by 3.36% and GAIL India down by 1.70% were the top losers.

Meanwhile, Narendra Modi’s two-day visit to UAE next week mainly focuses to boom trade and investments between the two regional economic powerhouses and also aims to attract much needed foreign investment to boost the economy. The visit aims to attract the huge untapped potential of the Abu Dhabi Investment Authority (ADIA) sovereign wealth funds estimated at over $800 billion for infrastructural needs in the backdrop of the $1 trillion infrastructure spending planned by India. India's on-going talks with the Gulf countries on finalizing Free Trade Agreement (FTA) are also expected to get a new boost with the Indian leader's visit. Attracting more foreign direct investments to India, which is among the top three trade partners of the UAE, is certainly one of the main agendas of the Indian leadership.

Further this visit will also give impetus to Bilateral Investment Protection Agreements (BIPA) which earlier has not functioned to its potential to attract investments due to fluctuation in the Indian economy in the last two years. India is committed to implementing the BIPA signed with the UAE to encourage further investment flow into the country. Earlier in December 2013 the deal was signed to ensure protection of cross border investments by India and the UAE which aimed to speed up the investments and also giving a fresh momentum to stalled joint venture projects.

Currently, the UAE investments in India are estimated to be $8 billion of which around $3.01 billion as of January 2015 is in the form of foreign direct investment, while the remaining is portfolio investment. Due to curb on gold imports the two-way trade has declined from a record high of $75.45 billion in 2012-13 to $59.54 billion in 2013-14. The UAE's investments in India are mainly concentrated in five sectors which include 15.52% in Construction Development, 13.09% in Power, 9.90% in Metallurgical Industries, 9.58% in Services Sector and 4.90% in Computer Software & Hardware.

UAE is the tenth biggest investor in India in terms of FDI, investments by Indian companies in the UAE are estimated to be in excess of $55 billion, making the Gulf country a sought-after destination of Indians.

The CNX Nifty touched a high and low 8,429.50 and 8337.95 respectively.

The top gainers on Nifty were Mahindra & Mahindra up by 3.59%, Cipla up by 3.10%, Tata Power up by 2.74%, Sun Pharma up by 2.52% and Lupin up by 2.49%. On the flip side, Vedanta down by 8.26%, Tata Steel down by 6.04%, Hindalco down by 5.11%, Bosch down by 2.40% and NMDC down by 2.35% were the top losers.

European Markets were trading in the green; France’s CAC was up by 1.83%, Germany’s DAX was up by 1.72% and UK's FTSE was down by 0.70%.

The Asian markets closed in green on Thursday, after China reassured markets that it would not allow the yuan to plummet in the wake of surprise devaluation this week. China’s exports are expected to grow this year while the pace of decline in imports will ease in the latter part of the year. China will study new measures to support the trade sector as the sector still faces increasing downward pressure. South Korea’s finance ministry stated that Chinese economic trends and exports and their influence to South Korea are more important to the local economy than short-term movements of the yuan. The finance ministry’s comment was follow up on China’s decision to devalue the Chinese currency this week. Hong Kong’s economy is expected to have expanded slightly in the second quarter helped by consumption, but the outlook in coming months will be dampened by a slowdown in China, a drop in mainland tourists to the city and weak retail sales.  Prospects for the Asian financial centre could be further compounded if surprise Chinese yuan devaluation this week puts a deeper dent in tourists’ spending power. Economic growth for the April to June quarter is forecast to have expanded 2.1%. Malaysian GDP fell to a seasonally adjusted 4.9%, from 5.6% in the preceding month. Japan’s Core Machinery Orders fell and stood at -7.9%, from 0.6% in the preceding month.