Sensex starts FY 2013 on a cautiously optimistic note; broader markets outperform

After snapping the last quarter of FY 2011-12 with over twelve percent gains, stock markets in India have started the FY 2013 on an optimistic note thanks to the supportive global as well as local tidings.

Sentiments on street got boosted with the largely positive leads from markets across Asia which gained on the back of surprisingly upbeat Chinese manufacturing data, which gained momentum for a fourth straight month to reach 11 month high levels in March alleviating worries over the world’s second largest economy’s hard landing.

The key domestic gauges gained some ground after breaching the psychological 17,450 (Sensex) and 5,300 (Nifty) levels as investors showed largely across the board buying interests. However, the going got tad turbulent in the second half tracking the European markets which got off to a positive opening but failed to capitalize on the momentum because of the Euro-zone manufacturing PMI numbers which were bit disappointing and weighed on investors’ morale.

Nevertheless, the domestic frontline equity gyrating in a tight range on the first trading session of the holiday truncated week snapped second straight session in the green terrain with close to half a percent gains. The rate sensitive counters like Bankex and Realty surged over a percent in the session as investors at large have now shifted their focus towards the RBI's quarterly monetary policy review meet scheduled in April, hoping that the central bank would employ some liquidity easing measures to stimulate economic growth.

Besides, most automobile companies traded on a positive note after reporting pretty strong sales numbers for the month as well as for the financial year. Furthermore, the power sector stocks rallied with fervor amid reports that Tamil Nadu Electricity Regulatory Commission (TNERC) approved a steep 37% hike in power tariff for one year, effective from April 1. The move would not only generate additional revenue of Rs 7,874 crore for Tamil Nadu Generation and Distribution Company (TANGEDCO), but also help it to recover its full costs in the ensuing financial year of 2012-13.

Meanwhile, investors shrugged the weak manufacturing PMI numbers for March which showed the expansion of India's factory sector slowed for the third month as growth in new orders eased and costs for raw materials kept rising. On the other hand, investors were seen booking some profits in sectors like Oil & Gas, Metal and defensive Healthcare.

On the global front, most Asian markets settled on a positive note on the first trading day of the month after reports showed that Chinese manufacturing gained momentum for a fourth straight month in March, helped by a recovery in the vehicle, tobacco and electronics sectors. While the European markets post a positive opening in the session came off the highs after reports showed factory activity in the Euro-euro zone worsened in March, dropping to three month low levels.

Back home, the NSE’s 50-share broadly followed index Nifty, gained about half a percent to settle above the psychological 5,300 support level while Bombay Stock Exchange’s Sensitive Index - Sensex amassed seventy four points to finish above the crucial 17,450 mark. Moreover, the broader markets showed resilience and surged by over a percent, comprehensively outperforming their larger peers.

The markets rose on tepid volumes of over Rs 1.18 lakh crore, since it was the second day of a new F&O series. The market breadth remained positive through the session as there were 1932 shares on the gaining side against 852 shares on the losing side while 95 shares remained unchanged.

Finally, the BSE Sensex gained 73.95 points or 0.42% to settle at 17,478.15, while the S&P CNX Nifty rose by 22.35 points or 0.42% to close at 5,317.90.

The BSE Sensex touched a high and a low of 17,529.98 and 17,382.38 respectively. The BSE Mid cap and Small cap index up by 1.08% and 1.68% respectively.

The top gainers on the Sensex were DLF up 2.88%, NTPC up 2.74%, TCS up 2.01%, L&T up 1.96% and M&M up 1.66%, while Bajaj Auto down 1.45%, Hindalco Industries down 1.39%, Sterlite Industries down by 1.26%, Reliance down by 1.00% and Hindustan Unilever down by 0.98% were the major losers on the index.

The top gainers on the BSE sectoral space were Consumer Durables (CD) up 3.89%, Power up 1.89%, Capital Goods (CG) up 1.74%, Realty up 1.59% and Bankex up 1.02%, while Oil & Gas down 0.28%, Metal down 0.27%, Health Care (HC) down 0.13% and Auto down 0.06% were the top losers on the BSE sectoral space.

Meanwhile, manufacturing activity in India has declined marginally in the month of March as compared to February, as per the HSBC PMI numbers. The seasonally adjusted HSBC Purchasing Managers’ Index (PMI) - a headline index designed to measure the overall health of the manufacturing sector - registered 54.7 in March, down from February’s 56.6. It stood at 57.5 in January. Though the numbers have been above the 50 mark that separates growth from contraction, they are tad disappointing.

The rate of expansion has been the weakest in three months. This has been attributed to shortages in power supply and increasing prices of raw materials. Even though demand has improved, the manufacturers’ propensity to process new orders has been limited due to these shortages. As a result customers have also been hesitant in placing new demands. There has also been a marked increase in the backlog of work, in fact the fastest in the history of the series and an increase in delivery timing. 

On a more positive note, new export order growth gained momentum in March. Employment also went up marginally to accommodate the increase in output. On the inflation front, while inflation of output prices has eased, the prices of raw materials have increased. This suggests that inflation could pick up again as cost pressures are passed on to customers. Given these upside risks to inflation the RBI's easing cycle, in terms of timing and magnitude, depends on the extent to which these risks materialize.

The HSBC PMI number is closely followed as it is a fairly good indicator of the level of industrial activity in the country. In fact in the past these numbers have been more accurate than the government’s estimates. Even though the numbers have been declining for the third consecutive month, they are depicting a consolidating growth trend.

The S&P CNX Nifty touched a high and low of 5,331.55 and 5,278.80 respectively.

The top gainers on the Nifty were JP Associates up 4.65%, Reliance Infra up 4.56%, RPower up 4.27%, HCL Tech up 3.88% and NTPC up 3.20%. On the flip side, Ranbaxy down by 2.60%, BPCL down 1.66%, Baja Auto down 1.47%, Sterlite Industries down 1.40% and Dr Reddy down 1.39% were the top losers on the index.

The European markets were trading mixed, as France's CAC 40 down 0.24%, Britain’s FTSE 100 up 0.41%, while Germany's DAX was up by 0.18%.

The Asian markets made mostly green closing on Monday, starting the new quarter with gain. It was the report that China’s Purchasing Managers’ Index climbed to a one-year high of 53.1 in the month of March from 51 the previous month, which lifted the sentiments in the region. Adding to that there were some upbeat earnings report supporting the markets today, China Railway Construction and China Railway Group, the nation’s two biggest listed builders reported report higher-than-expected profits. The South Korean index Kospi advanced was one of the top performer in the region after the country’s credit rating outlook was raised by Moody’s Investors Service. The ratings agency cited the nation’s fiscal strength and increased resilience to market turmoil in a statement today.

However, Hong Kong’s stock exchange Hang Seng was a bit under selling pressure from the developers after the Chinese government said it will continue to stabilize prices. Taiwanese index lost considerably and was the laggard of the day.

Stock market in China remained closed for public holiday and will reopen on Thursday.