Benchmarks fail to protect gains; end with over half a percent cut

Indian stocks markets turned a volte-face on Tuesday, as what started on a promising note ended as a dismal show. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted into the negative territory for the second consecutive session despite getting off to a gap-up opening. Marketmen remained optimist for half of the session with the report that India's infrastructure sectors clocking their highest growth in 16 months in March 2016, with the index for core industries climbing 6.4 per cent, against 5.7 per cent in February. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 435 crore on May 02, 2016. However, the sanguinity in local markets came under check as profit booking in metal, PSU and Oil & Gas counters exerted downside pressure on the frontline indices. Furthermore, investors turned jittery after International Monetary Fund (IMF) in its report indicated that China and Japan’s economies are expected to slow sharply over the next two years but Asian growth will remain strong as domestic demand takes up the slack from weak global trade. In its Regional Economic Outlook for Asia and the Pacific, the fund also warned of several external challenges, from weakness in advanced economies, weak global trade and increasingly volatile global financial markets. On the domestic front, sentiments were undermined by the repot that the growth in India's manufacturing sector slowed sharply in April as new business inflows were broadly unchanged during the month.

On the global front, Asian marketed ended mixed on Tuesday as investors grew doubtful about global central banks’ ability to boost growth through aggressive policy easing. Stock markets in Hong Kong and Taiwan were the region’s biggest losers after a survey showed activity at China’s factories shrunk for the 14th straight month in April as demand stagnated. Meanwhile, European shares opened lower weighed down by selling pressure in mining and autos, while sluggish earnings from major banks also dampened sentiment. All the major European Indies, including Germany’s DAX, France’s CAC and the UK’s FTSE 100 declined by over a percent in early trade.

Back home, after getting positive start, the local benchmark indices extended their gains and touched the day’s highs in mid morning trade, as investors turned optimistic after the combined output of eight crucial infrastructure sectors jumped to a 16-month high of 6.4% in March due to a double-digit growth in refinery products, fertilizers, cement and electricity. Also, a private report said that the Indian economy is expected to clock a GDP growth of 7.4 percent this fiscal largely driven by the lagged impact of a good monsoon and increased consumer spending, supported by pay commission award. However, sentiments turned pessimistic in afternoon session and the indices started declining, on account of profit booking in some specific sectors and weak start of the European markets. The selling accelerated in the late afternoon as investors chose to lighten their positions in the wake of a few disappointing earnings. Thereafter there were no signs of any promising recovery attempt which could lead the indices in green and they finally settled with cuts of over half a percent. The NSE’s 50-share broadly followed index Nifty, took a cut of over half a percent to settle below the crucial 7,750 support level, while Bombay Stock Exchange’s sensitive index, Sensex slipped by over two hundred a points and closed below the psychological 25,250 mark. Moreover, the broader markets too failed to show any kind of fervor and closed with losses of around half a percent. On the BSE sectoral space, barring the Realty counter, all the gauges closed in the negative territory with indices like information technology, Metal and PSU suffering nasty lacerations of 1.57%, 1.34% and 1.22% respectively. The market breadth remained awful as there were 1167 shares on the gaining side against 1474 shares on the losing side, while 149 shares remained unchanged.

Finally, the BSE Sensex declined by 207.27 points or 0.81% to 25229.70, while the CNX Nifty dropped 58.90 points or 0.75% to 7,747.00. 

The BSE Sensex touched a high and a low 25705.96 and 25192.94, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 0.85%, while Small cap index was lower by 0.28%.

The only gaining sectoral index on the BSE was Realty up by 0.32%, while IT down by 1.57%, Metal down by 1.34%, PSU down by 1.22%, Oil & Gas down by 1.04% and FMCG down by 1.03% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 1.97%, Asian Paints up by 1.02%, Adani Ports &Special up by 0.96%, HDFC up by 0.62% and Tata Motors up by 0.54%. On the flip side, Coal India down by 3.07%, BHEL down by 2.58%, ICICI Bank down by 2.47%, Lupin down by 2.34% and TCS down by 1.78% were the top losers.

Meanwhile, making a strong end for the financial year 2015-16 and pointing to a possible industrial recovery ahead of the new financial year, the core sector growth in the country has jumped to 16-month high in the month of March. The eight core sector industries grew to 6.4 percent in the month of March. The eight industries - crude oil, petroleum refinery products, natural gas, fertilisers, coal, electricity, cement and finished steel have a weight of 38 percent in the overall Index of Industrial Production (IIP) had shrunk to (-) 0.7 percent in March last year. During the fiscal 2015-16 as a whole, the eight core sectors grew by 2.7 percent, while it had expanded by 4.5 per cent in 2014-15. The March 2016 performance is the best since November 2014, when these sectors had expanded by 6.7 per cent.

According to data released by the ministry of commerce and industry, the combined Index of Eight Core Industries stood at 188.0 in March, 2016, which was 6.4 percent higher compared to the index of March, 2015. Its cumulative growth during April to March, 2015-16 was 2.7 percent. Out of eight sector, only two sectors posted negative output growth in March.

Among the eight sectors, four sectors registered a double digit growth. Petroleum Refinery production having weight age of 5.94 percent increased by 10.8 percent in March, 2016 over March, 2015. Its cumulative index during April to March, 2015-16 increased by 3.8 percent over the corresponding period of previous year.  Fertilizer production having 1.25 percent weight increased by 22.9 percent in March, 2016 over March, 2015. Its cumulative index during April to March, 2015-16 increased by 11.3 percent over the corresponding period of previous year. Cement production having weight age of 2.41 percent increased by 11.9 percent in March, 2016 over March, 2015. Its cumulative index during April to March, 2015-16 increased by 4.6 percent over the corresponding period of previous year. Electricity generation having weight 10.32 percent increased by 11.3 percent in March, 2016 over March, 2015. Its cumulative index during April to March, 2015-16 increased by 5.2 percent over the corresponding period of previous year. 

Besides, Coal production having weight 4.38 percent increased by 1.7 percent in March, 2016 over March, 2015. Its cumulative index during April to March, 2015-16 increased by 4.6 percent over corresponding period of previous year. Steel production having weight age of 6.68 percent increased by 3.4 percent in March, 2016 over March, 2015. Its cumulative index during April to March, 2015-16 declined by 1.4 percent over the corresponding period of previous year.

On the other side, Crude oil and natural gas were the two sectors that suffered a fall in production in March. Crude Oil production having weight 5.22 percent decreased by 5.1 percent in March, 2016 over March, 2015. Its cumulative index during April to March, 2015-16 decreased by 1.4 percent over the corresponding period of previous year. The Natural Gas production having 1.71 percent weight decreased by 10.5 percent in March, 2016 over March, 2015. Its cumulative index during April to March, 2015-16 declined by 4.2 percent over the corresponding period of previous year.

The pick-up in the momentum of core sector growth in March was a ‘positive surprise’ and a favorable base effect as well as the pick-up in the pace of expansion of the core sector and automobile production augur well for a mild improvement in IIP growth in March.

The CNX Nifty traded in a range of 7,890.25 and 7,735.15. There were 15 stocks advancing against 35 stocks decliners on the index.

The top gainers on Nifty were Aurobindo Pharma up by 4.14%, Bharti Airtel up by 2.29%, Bharti Infratel up by 2.22%, Idea Cellular up by 1.61% and Power Grid up by 1.61%. On the flip side, Coal India down by 3.71%, Lupin down by 3.17%, BHEL down by 2.66%, Ambuja Cement down by 2.59% and ICICI Bank down by 2.45% were the top losers.

European markets were trading in red; Germany’s DAX declined 164.27 points or 1.62% to 9,959.00, France’s CAC decreased 55.57 points or 1.25% to 4,387.18 and UK’s FTSE 100 was down by 45.78 points or 0.73% to 6,196.11.

Asian equity markets ended mixed on Tuesday, with China's Shanghai Composite index ending higher in thin trading following the holiday weekend after President Xi Jinping pledged to maintain the healthy development of the stock market. Investors shrugged off the latest survey from Caixin, which revealed that activity in China's vast manufacturing sector unexpectedly declined further in April despite government stimulus. The manufacturing PMI fell to 49.4 from 49.7 in March. However, markets in Hong Kong, Malaysia, Singapore and Taiwan fell sharply as trading resumed after a long weekend. The Japanese market was closed today for the Constitution Day holiday.