Indian markets snap 6-day winning streak; Nifty ends below 8350 mark

Indian benchmark indices showed a lackadaisical performance on Tuesday as they failed to extend their gaining streak and settled below the neutral line amid weak global cues. Today’s session largely remained characterized by choppiness as the aimless indices oscillated in a very tight range and investors took a breather and resorted to mild profit booking in heavyweights after sharp gains in the previous six sessions. Sentiments came under pressure with the report that growth in India's services firms fell to a seven-month low of 50.3 in June as compared to the previous month of May as new business grew at its slowest pace in the previous 11 months. The Nikkei/Markit Services Purchasing Managers' Index (PMI) cooled for the third straight month in June, having declined to 51 points in May, the weakest since November 2015. Some weakness also came with the Global rating agency Moody's report that stated India's economic growth over the next two years will face challenge from lacklustre global demand and high leverage in some corporate sectors. According to the report, continued high corporate leverage, low nominal domestic growth and lack of corporate pricing power, will hold back investment activity for at least several quarters. However, investors got some comfort with Finance Minister Arun Jaitley’s statement, who calling India a 'sweet spot' in the subdued global economy said that indication of “good rains” will further boost the country’s growth momentum. Also, the increase in intensity and coverage of rainfall over the past weekend resulted into a sharp decline in the deficit so far this monsoon season. 

On the global front, Asian markets ended mostly in red on Tuesday as commodities dropped and the Japanese yen strengthened on worries about renewed political uncertainty in the UK and the fragile balance sheets of Italian banks. However, shares in China bucked a slump across Asia, as Chinese investors became more hopeful about President Xi Jinping’s calls for state-owned enterprise reform. A private survey of small and medium companies in China showed activity in the services sector grew at a quicker pace in June. Meanwhile, European stocks fell in early trade as concerns about the impact of Brexit weighed on investors’ minds ahead of the Bank of England’s financial stability report.

Back home, the local benchmark indices started the session on a somber note, investors largely remained influenced by the daunting sentiments prevailing in Asian markets. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads. The key gauges suffered a setback in afternoon trades as sudden bouts of profit booking emerged in the local markets immediately after a somber European market opening. Though, the bourses recovered from the lows of the day but could not succeed in minimizing the huge losses by the end of trading session.  Finally the NSE’s 50-share broadly followed index Nifty, took a cut of over quarter a percent to settle below the crucial 8,350 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by over hundred points and closed below the psychological 27,200 mark. On the BSE sectoral space, barring the Metal and Capital Goods counters, all the gauges closed in the negative territory with indices like Auto and Power suffering lacerations of around a percent. Though there were no other sectoral gainers, there were some among individual gainers like Aurobindo Pharma, Bosch, Coal India and Tata Steel which gained some traction in the session.

The market breadth remained pessimistic as there were 1277 shares on the gaining side against 1476 shares on the losing side, while 140 shares remained unchanged.

Finally, the BSE Sensex ended lower by 111.89 points or 0.41% to 27166.87, while the CNX Nifty dropped 34.75 points or 0.42% to 8,335.95. 

The BSE Sensex touched a high and a low 27348.66 and 27127.30, respectively. The broader indices made a negative closing; the BSE Mid cap index ended tad lower by 0.08%, while Small cap index was down by 0.11%.

The top gaining sectoral indices on the BSE were Metal up by 0.40% and Capital Goods up by 0.35%, while Auto down by 1.09%, Power down by 0.71%, Realty down by 0.63%, TECK down by 0.58% and IT down by 0.50% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 1.35%, Tata Steel up by 0.88%, Reliance Industries up by 0.64%, Larsen & Toubro up by 0.60% and HDFC up by 0.55%. On the flip side, GAIL India down by 2.45%, Power Grid down by 2.36%, Bharti Airtel down by 2.16%, NTPC down by 1.86% and Tata Motors down by 1.78% were the top losers.

Meanwhile, the growth of services activity in India slowed to a seven-month low in June amid softer expansion in new business orders, adding to the clamour for rate cuts by the Reserve Bank. The seasonally adjusted Nikkei Services Business Activity Index, which maps the service sector activity, fell to 50.3 in June from 51 in May, one of the lowest readings in the current 12-month sequence of above-50 readings. A reading above 50 represents expansion, while one below means contraction.

Meanwhile, the seasonally adjusted Nikkei India Composite PMI Output Index, which maps both manufacturing and services sectors rose to a three-month high of 51.1 in June from 50.9 in May, but remained below its long-run average and pointed to a slight pace of expansion.

As per the survey, the new orders received by the Indian service sector grew at the slowest pace in eleven months. In contrast, manufacturing order books increased at the quickest pace since March, outweighing the slowdown in services and therefore contributing to a quicker expansion in private sector new business.

On price front, the input prices in the Indian service sector rose for the ninth consecutive month in June. Cost burdens among manufacturers rose at the slowest pace since March. Purchase prices among manufacturers increased again, but at the weakest pace since March. Prices charged by Indian service providers continued to rise in the latest survey period. 

On the jobs front, Indian service providers signalled a slight increase in staffing levels during June. Moreover, future expectations dipped to the lowest since February, highlighting concerns regarding the sustainability of the economic upturn. Although manufacturing was higher in June, variables such as new orders, employment and production stayed below their respective long-run averages.

The CNX Nifty traded in a range of 8,381.45 and 8,319.95. There were 15 stocks advancing against 36 decliners on the index.

The top gainers on Nifty were Aurobindo Pharma up by 1.87%, Coal India up by 1.53%, YES Bank up by 1.20%, Bosch up by 1.13% and Bharti Infratel up by 0.91%. On the flip side, GAIL India down by 2.65%, Power Grid down by 2.63%, Tata Motors - DVR down by 2.62%, NTPC down by 2.21% and Hindalco Industries down by 2.06% were the top losers.

European markets were showing mixed trend, UK’s FTSE 100 was tad higher by 1.72 points or 0.03% to 6,523.98, Germany’s DAX declined by 132.97 points or 1.37% to 9,576.12, while France’s CAC decreased 56.75 points or 1.34% to 4,178.11.

Asian markets ended mostly lower after five straight days of gains on Tuesday, as commodities dropped and the Japanese yen strengthened on worries about renewed political uncertainty in the UK and the fragile balance sheets of Italian banks. The International Monetary Fund Managing Director Christine Lagarde said that Britain could lose up to 4.5% points of growth by 2019 if it presses ahead with Brexit. She added there was real uncertainty around what conditions there would be for trade deals with the EU after Brexit. Shares of struggling Italian banks tumbled on the Milan stock market Monday after the European Central Bank told Monte dei Paschi di Siena, the country's third-biggest lender, to reduce its debt burden. There were reports of Italy preparing to unilaterally pump billions of euros into its faltering banking system. Shares sagged further as caution before Friday’s US jobs report kept investors from making big bets. Japanese shares snapped a six-day winning streak as the yen's strength hurt exporters and banks followed their European peers lower. Chinese shares bucked the weak trend across Asia after a fresh reading on China's service sector signaled an improvement in activity levels in June and President Xi Jinping called for efforts to propel reforms of state-owned enterprises. Indonesian financial markets are closed all week for the Eid al-Fitr holiday.