Benchmarks eke out slender gains

Indian equity benchmarks managed to end the Tuesday’s session with marginal gains amid slew of economic data announcements. Markets kick-started the session with a decent gains and traded in narrow range as sentiment got a boost after India’s economy grew by 7.4% in the second quarter (July-September), outpacing China to become the fastest growing major economy. Some support also came in with Finance Minister Arun Jaitley’s statement that GDP in the current fiscal will be better than the growth rate recorded in the last financial year and improve further in subsequent years. Meanwhile, Reserve Bank of India (RBI) in its fifth Bi-monthly Monetary Policy review kept the key policy rate unchanged but affirmed the central bank's commitment to ease it as and when room is available, saying inflation is likely to perform better than expected.

However, markets pared most of their initial gains after India’s manufacturing sector grew at its weakest pace in over two years in November as demand and output continued to soften. Nikkei’s Manufacturing Purchasing Managers’ Index (PMI), compiled by Markit, fell to a 25-month low of 50.3 in November from October’s 50.7. Some concern also came with report that the growth in eight core sectors -- coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity, which comprise nearly 38% of the weight of items included in the Index of Industrial Production (IIP), slowed to 3.2% in October 2015 compared to 9% in the corresponding month last year on the back of sharp decline in crude oil and steel production.

On the global front, European counters have made a sluggish start after the Swiss GDP unexpectedly stagnated in third quarter; output was unchanged in the three months through September, after increasing of 0.2 percent in the prior period. Asian markets rallied on Tuesday after currencies advanced for the first time in five days against the US dollar.

Back home, traders took some encouragement with global rating agency Moody's Investors Service stating that the Reserve Bank of India's efforts in bringing down inflation is credit positive for the country and hoped that the central bank will continue to remain vigilant in sticking to the target level. Appreciation in Indian rupee too aided sentiments. The partially convertible rupee was trading at 66.53 per dollar at the time of equity market closing against the Monday’s close of 66.67 on the Interbank Foreign Exchange.

The PSU oil marketing companies remained in action today, after the petrol and diesel prices were reduced in the fortnightly review. ATF price was cut by a marginal 1.2 per cent, the third straight monthly reduction since October. Simultaneously, oil firms have also raised the prices of non-subsidised LPG, by Rs 61.50 per 14.2-kg bottle. BPCL and IOC gained around 3 percent, while HPCL was up by around a percent. Stocks related to auto counter too remained buzzing on announcing the monthly sales numbers, Eicher Motors’ motorcycle division reported a 48% jump in total sales in November, Ashok Leyland, reported an increase of 16% in sales, Maruti Suzuki India, registered a rise of 9.7% in its total car sales, while M&M reported 21% growth in November sales.

The NSE’s 50-share broadly followed index Nifty rose by around twenty points and ended above the psychological 7,950 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by over twenty points to finish above the psychological 26,150 mark. Broader markets too traded with traction throughout the trade and ended the session with a gain of around half a percentage point. The market breadth remained in favor of advances, as there were 1,672 shares on the gaining side against 1,156 shares on the losing side while 145 shares remain unchanged.

Finally, the BSE Sensex gained 23.74 points or 0.09% to 26169.41, while the CNX Nifty added 19.65 points or 0.25% to 7954.90. 

The BSE Sensex touched a high and a low 26246.02 and 26121.52, respectively. The BSE Mid cap index was up by 0.78%, while Small cap index was up by 0.46%.   

The top gaining sectoral indices on the BSE were Metal up by 3.18%, FMCG up by 1.07%, Healthcare up by 1.07%, PSU up by 0.97% and Oil & Gas up by 0.84%, while Auto down by 0.58%, Consumer Durables down by 0.34%, Bankex down by 0.29%, TECK down by 0.22% and IT down by 0.06% were the losing indices on BSE.

The top gainers on the Sensex were Vedanta up by 4.66%, Dr. Reddys Lab up by 3.31%, Tata Steel up by 3.30%, Coal India up by 3.27% and Hindalco up by 3.24%. On the flip side, Bharti Airtel down by 3.53%, GAIL India down by 1.79%, Axis Bank down by 1.54%, Tata Motors down by 1.41% and Infosys down by 1.08% were the top losers.

Meanwhile, going on expected lines, Reserve Bank of India (RBI) in its fifth Bi-monthly Monetary Policy Review, 2015-16 has maintained status quo, keeping all its policy rate unchanged. The RBI had taken the markets by surprise in its last policy review when it cut interest rates by more than expected of 50 basis points (bps), but the RBI governor that time had categorically said that the Bank has front-loaded policy action and is now keen on policy transmission of a his cumulative 125 bps cut so far this year by the lenders. Hence keeping the key policy rates unchanged was not a surprise and the next round of rate cuts is likely to come in the next monetary policy meet in February, ahead of the budget. Also, there was some caution ahead of the US Fed meeting and lingering concerns over inflation. Consumer inflation crept back to a four-month high of 5 per cent in October, which likely weighed on RBI’s decision.

In its policy stance RBI decided to- keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.75 per cent; keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liability (NDTL); continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and continue with daily variable rate repos and reverse repos to smooth liquidity. Consequently, the reverse repo rate under the LAF will remain unchanged at 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 7.75 per cent.

In its policy assessment, RBI noted that since the fourth bi-monthly statement of September 2015, global growth continues to be weak and the global financial markets began Q4 on a calmer note after the Federal Open Market Committee stayed on hold in September. However, on the domestic front, provisional estimates of gross value added (GVA) at basic prices for Q2 of 2015-16 rose on the back of acceleration in industrial activity. Value added in agriculture and allied activities picked up on the modest increase in kharif output and timely policy interventions to stem the effects of the deficient south-west monsoon. The Index of Industrial Production picked up in the second quarter. Though, it said that not all indicators, however, are positive. While urban consumption is showing signs of a pick-up in some areas such as passenger vehicles sales, rural demand has been weakened by two consecutive deficient monsoons and slowing construction activity. Nevertheless, new project announcements as measured by the Centre for Monitoring Indian Economy grew more strongly in the second quarter. It remains to be seen whether growing public investment can crowd in private investment on a sustained basis, despite the still-low capacity utilisation.

It further stated that retail inflation measured by the consumer price index (CPI) increased for the third successive month in October 2015, pushed up by a surge in the monthly momentum. Food inflation rose sharply in October, driven especially by pulses. CPI inflation excluding food, fuel, petrol and diesel also rose for three consecutive months on account of price increases in respect of housing, recreation and amusement, and personal care and effects. It further said that while oil prices, barring geopolitical shocks, are expected to remain benign for a few quarters more, the uptick of CPI inflation excluding food and fuel for two months in succession warrants vigilance and inflation is expected to broadly follow the path set out in the September review, with an inflation target for January 2016 at 6 per cent.

RBI also said that the outlook for agriculture is subdued, in view of both rabi and kharif prospects being hit by monsoon vagaries. It noted that while there are areas of robust growth in manufacturing such as capital goods and passenger cars, weak rural and external demand holds back stronger overall growth. Similarly, while prospects for a revival in service sector activity have been boosted by optimism on new business, pockets of lackluster activity such as construction weigh on the overall outlook. Going further it said that it will follow developments on commodity prices, especially food and oil, even while tracking inflationary expectations and external developments.

The CNX Nifty touched a high and low 7972.15 and 7934.15 respectively. 

The top gainers on Nifty were Vedanta up by 5.17%, Tata Steel up by 3.81%, Coal India up by 3.49%, BPCL up by 3.46% and Hindalco up by 3.44%. On the flip side, Bharti Airtel down by 3.16%, Adani Ports &Special down by 1.76%, Axis Bank down by 1.61%, GAIL India down by 1.41% and Maruti Suzuki down by 1.34% were the top losers.

European Markets were trading mostly in red; France’s CAC was down by 0.48% and Germany’s DAX was down by 0.46%, while UK’s FTSE was up by 0.32%.   

Asian markets closed in positive territory on Tuesday as investors were unfazed by a lower finish on Wall Street overnight, with the Nikkei breaking the 20,000 benchmark for the first time in three months, Encouraging economic data from Japan boosted investors' appetite for risk. The uptrend was despite China reporting a weak Purchasing Managers' Index (PMI) for November. Reports showed that China's manufacturing PMI, a measure of activities in the factory sector, declined marginally, from 49.8 in October to 49.6 in November. China's manufacturing PMI, according to Caixin/Markit, indicated that factory activity for November declined at a slower rate than in the previous month. The services sector PMI had a reading of 53.6 in November, 0.5 point higher than the previous month, reflecting the country's gradual shift to a more services-led economy. Japanese shares rose for the first time in three days as a weak yen bolstered exporter shares. Economic reports were mostly positive, with a gauge of manufacturing activity expanding at its fastest pace in 20 months in November, while an 11.2 percent increase in capital expenditure in the July-September period pointed to upward revision to third-quarter GDP data. South Korea's KOSPI closed higher after government report showed South Korea's consumer inflation inched up to a one-year high in November on recovery in consumption, spurring hopes about recovery in Asia's fourth-largest economy. However, gains were capped by official data from the ministry of trade, industries and energy showing that the country's exports declined for the 11th consecutive month in November.