Benchmarks continue to trade in red in early noon deals

Indian equity markets continue to trade in red in the early noon session on account of selling in frontline blue chip counters. Further, investors remained cautious ahead of the possible announcement of the new Reserve Bank of India governor the Wholesale Price Index-based inflation data later in the week. Traders were also reacting to mixed macro data where industrial production recovered, growing by 1.2 percent in May compared to (-) 0.8 percent in April, while, consumer inflation edged slightly higher to 5.77 per cent in June, against 5.76 per cent increase in the previous month. In scrip specific development, shares of Indiabulls group fell on report that the IT officials were searching Indiabulls offices across the country.

On the global front, Asian indices ruled higher, taking their gains of the past few sessions forward, amid improved risk appetite following overnight gains on the Wall Street and a jump in crude oil prices.

The BSE Sensex is currently trading at 27784.56, down by 23.58 points or 0.08% after trading in a range of 27752.14 and 27928.76. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.60%, while Small cap index was lower by 0.81%.

The top gaining sectoral indices on the BSE were Metal up by 1.75%, Oil & Gas up by 0.49%, IT up by 0.46%, TECK up by 0.31% and PSU up by 0.10%, while Realty down by 2.76%, Auto down by 0.69%, Capital Goods down by 0.63%, Power down by 0.59% and Consumer Durables down by 0.55% were the losing indices on BSE.

The top gainers on the Sensex were ONGC up by 3.49%, Tata Steel up by 2.89%, GAIL India up by 2.52%, Reliance Industries up by 1.05% and TCS up by 0.66%. On the flip side, Axis Bank down by 1.65%, Power Grid Corpn. down by 1.53%, Maruti Suzuki down by 1.34%, Larsen & Toubro down by 1.13% and HDFC down by 0.87% were the top losers.

Meanwhile, with a spurt in cotton prices, the domestic cotton prices is likely to adversely impact the yarn demand and profitability of spinning companies in the second quarter. Domestic rating agency ICRA in a report on the Indian spinning industry has said that the prices of ginned cotton have increased significantly from about Rs 90-92 a kilogram in April 2016 to about Rs 122 kg currently, surpassing international rates, which will hurt yarn demand and profitability of spinning companies in the current quarter.

As per ICRA estimates, the profitability of spinning industry will be adversely impacted because of the price rise as it faces challenges of slow growth in domestic consumption and high reliance on exports. With domestic cotton prices higher than international ones, export prospects for the spinning industry also present a challenge.

The report further noted that many spinning companies had expected cotton prices to be stable in 2016, and the cotton inventory stocking was not beyond two months in March 2016. The spinning players, who may have stocked inventories for four to five months in March 2016, may witness improved profitability as they are likely to gain from higher yarn prices.

ICRA further said that slower cotton sowing and decline in cotton sown area, apart from cotton stocking by intermediaries, could have led to this sharp rise in prices. However, the recent increase in cotton prices can motivate the farmers further and the cotton sowing area can improve in the coming months. Stability in cotton prices is most critical for a profitable textile industry as it minimises the risks of inventory losses and the need for a price hike for the existing and future orders.

The CNX Nifty is currently trading at 8501.50, down by 19.55 points or 0.23% after trading in a range of 8493.55 and 8550.25. There were 15 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were BHEL up by 3.76%, ONGC up by 3.16%, Tata Steel up by 2.97%, GAIL India up by 2.35% and Hindalco up by 1.15%. On the flip side, BPCL down by 2.57%, Tata Motors - DVR down by 1.91%, Axis Bank down by 1.70%, Power Grid Corpn. down by 1.53% and Maruti Suzuki down by 1.52% were the top losers.

The Asian markets were trading mostly in green, KOSPI Index increased 14.32 points or 0.72% to 2,005.55, Shanghai Composite increased 15.78 points or 0.52% to 3,065.16, Taiwan Weighted increased 16.29 points or 0.18% to 8,857.75, Hang Seng increased 111.48 points or 0.53% to 21,336.22 and Nikkei 225 increased 154.57 points or 0.96% to 16,250.22.

On the other hand, Jakarta Composite decreased 2.05 points or 0.04% to 5,097.48 and FTSE Bursa Malaysia KLCI decreased 0.82 points or 0.05% to 1,653.15.