Fatigued markets settle almost flat

Wednesday’s trading session was clearly of consolidation as the Indian benchmark indices appeared a bit fatigued and remained in directionless trajectory throughout the day.  However, the benchmarks managed to extend the winning momentum for the second consecutive day, as local sentiments continued to show signs of improvement after Indian Meteorological Department’s report that Southwest monsoon has hit Kerala. Today’s session largely remained characterized by choppiness as the aimless indices moved only sideways in a tight band lack of triggers. Sentiments got some support with the government pitching for a ratings upgrade with global agency Fitch Ratings citing improvement in macroeconomic conditions and its commitment to fiscal consolidation. Fitch Ratings had in December affirmed India's 'BBB-' rating with a stable outlook.  Appreciation in the rupee too provided some support to domestic markets. Indian rupee strengthened by 12 paise to 66.66 against the US dollar at the time of equity markets closing on increased selling of the American currency by exporters amid foreign fund inflows. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 499.73 crore on June 7, 2016. Meanwhile, defence-sector stocks, including Bharat Electronics, Astra Micro Wave Products, Reliance Defence and Engineering and Walchandnagar Industries, rallied after the private reports showed India was on its way to becoming a member of the Missile Technology Control Regime (MTCR). The deal will pave way for India to procure high-end missile technology and surveillance systems by leading manufacturers.  Moreover, logistics companies surged on hopes of clearance of the crucial Goods and Services Tax (GST) Bill in the upper house of the Parliament, while telecom stocks gained on reports the Telecom Commission has lowered the annual spectrum usage fee to 3% of revenue for all bands in the upcoming spectrum auction scheduled in July.

On the global front, Asian markets ended mixed on Wednesday after Japan revised its growth estimate for the first quarter of the year to 1.9%, while China reported that exports and imports contracted again in May in a sign of weak global and domestic demand. Further, European markets declined in early trade, retreating after two straight days of gains, as a drop in Austrian bank Erste knocked back financial stocks. However, energy stocks advanced as crude oil prices rose above the $50 mark for the first time in ten months.

Back home, the benchmark got off to a soft start as the indices showed signs of consolidation in early trade, a session after the awe-inspiring close to a percent rally. Thereafter, the frontline indices oscillated in an extremely tight range through the session as market participants remained on the sidelines lacking conviction amid the persistent worries over global financial stability. Investors remained cautious with the report that the World Bank has slashed global growth outlook for 2016 to 2.4 per cent from 2.9 per cent, citing sluggishly low commodity prices, uncertain capital flow and lukewarm demand in advanced economies. Yet, final hour buying ensured that the key indices do not shut shops below the neutral line and continued their northward journey for second consecutive day. Finally, the NSE’s 50-share broadly followed index Nifty, added single digit gains to settle above the crucial 8,250 support level, while Bombay Stock Exchange’s Sensitive Index or Sensex gained around eleven points and ended above the psychological 27,000 mark. Moreover, broader markets showed some resilience by outclassing their larger peers by a big margin as investors carried forward their value hunting in beaten down shares from the midcap and small cap space. On the BSE sectoral space, Power counter remained the top gainer in the space with over one and half a percent gains followed by the Capital Goods index which ended with similar gains. On the other hand, the IT index slipped by over half a percent followed by Tech counters which too settled with close to half a percent losses.

The market breadth was optimistic as there were 1587 shares on the gaining side against 1047 shares on the losing side, while 160 shares remained unchanged.

Finally, the BSE Sensex gained 10.99 points or 0.04% to 27020.66, while the CNX Nifty rose 6.60 points or 0.08% to 8,273.05.

The BSE Sensex touched a high and a low 27105.41 and 26973.71, respectively. The broader indices made a positive closing; the BSE Mid cap index ended up by 0.52%, while Small cap index was up by 0.89%.

The top gaining sectoral indices on the BSE were Power up by 1.77%, Capital Goods up by 1.76%, PSU up by 0.61%, Auto up by 0.44% and Realty up by 0.31%, while IT down by 0.61% and TECK down by 0.47% were the top losing indices on BSE.

The top gainers on the Sensex were BHEL up by 1.80%, Larsen & Toubro up by 1.52%, ICICI Bank up by 1.48%, Hero MotoCorp up by 1.32% and ONGC up by 1.27%. On the flip side, Infosys down by 1.50%, Asian Paints down by 1.23%, HDFC Bank down by 1.00%, Adani Ports &Special down by 0.95% and TCS down by 0.77% were the top losers.

Meanwhile, amid sluggish corporate lending, World Bank in its Global Economic Prospects has cut India’s growth projections by up to three percentage points to 7.6-7.7 per cent for 2016-17 and 2017-18 from 7.9 per cent pegged earlier in January. Even then, India will continue to be the fastest growing major economy in the world.

World Bank in its report cautioned India against 'notable headwinds' stating that rural consumption has been hard-hit by two years of poor monsoons. It further said that despite five interest rate cuts since 2015, credit growth to the corporate sector remains sluggish because of stressed asset quality in the banking sector. It also said that private investment will still be held back by infrastructure bottlenecks, a challenging regulatory environment, and by tight credit amidst the ongoing resolution of stressed assets in the banking sector. On the global front, the Bank downgraded its 2016 global growth forecast to 2.4 per cent from the 2.9 per cent pace projected in January.

However, World Bank in its report said that growth in India picked up to 7.6 per cent in 2015-16, a 0.4 percentage point increase over that in 2014/15, driven largely by domestic demand. Further, it said that the government's planned investment in infrastructure, and the streamlining of business procedures and of the tax regime, are expected to alleviate some constraints, and crowd in private investment. It also added that the increased public investment in power generation, roads, railways and urban infrastructure is contributing to an improved business environment and reduced supply-side constraints

The CNX Nifty traded in a range of 8,288.90 and 8,252.05. There were 29 stocks advancing against 22 decliners on the index.

The top gainers on Nifty were Tata Power up by 3.13%, HCL Tech up by 2.44%, Ambuja Cements up by 2.03%, Power Grid up by 1.80% and BHEL up by 1.76%. On the flip side, Kotak Mahindra Bank down by 1.64%, Infosys down by 1.62%, Zee Entertainment down by 1.40%, Asian Paints down by 1.33% and Adani Ports &Special down by 1.07% were the top losers.

European markets were trading mostly in red; Germany’s DAX decreased 60.4 points or 0.59% to 10,227.28 and France’s CAC was down by 23.94 points or 0.53% to 4,451.92, while UK’s FTSE 100 was up by 2.39 points or 0.04% to 6,286.92.

Asian equity markets ended mixed on Wednesday as the World Bank cut its global growth forecasts and Chinese trade data came in mixed, with a weaker-than-expected result for May exports and a much slower than expected drop in imports. The World Bank downgraded its 2016 global growth forecast to 2.4 percent from the 2.9 percent pace projected in January, citing sluggish growth in advanced economies, stubbornly low commodity prices, weak global trade, and diminishing capital flows. Meanwhile, oil hovered near eight-month highs and copper pared losses from the previous session on dollar weakness. Chinese shares closed a tad lower ahead of a long holiday and next week's MSCI announcement of the nation's yuan-denominated shares' inclusion into its global indexes. Investors also looked ahead to the release of inflation, industrial profits and new yuan loan data due in coming days. Mainland Chinese markets will be closed on Thursday and Friday for the Dragon Boat Festival while Hong Kong's market will only be closed on Thursday. Japanese shares ended a choppy session higher as the yen trimmed its early gains and energy shares benefited from higher oil prices.