Benchmarks continue to trade in red in late morning session

Indian bourses continued to trade in red in the late morning session as funds and retail investors indulged in booking profits at prevailing levels. Besides, a weakening trend on the other Asian markets also influenced the sentiment. However, the broader markets outperformed benchmark indices as investors turned their focus on fundamentally sound mid-cap and small-cap stocks as valuations in large-cap stocks seem stretched after yesterday’s rally. Investors got some comfort with Food Minister Ram Vilas Paswan’s statement that India is looking to import pulses from Myanmar and African nations to counter a domestic shortfall of 7.6 million tonnes that has driven local prices of key pulses like chickpea to a record high. More purchases of pulses could help the country to rein in its headline inflation, which hit a near two-year high in June on double-digit annual increases in prices of sugar, vegetables and pulses. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 1,767.06 crore on July 28, 2016.  Meanwhile, water levels in 91 major reservoirs in India rose 9 percent in the past week, as heavy rains lashed their catchment areas, but remained lower compared with those at this time last year and the 10-year average.  These dams together held 59.366 billion cubic metres of water on Thursday, compared with 68.454 billion cubic metres at this time last year and the 10-year average of 63.128 billion cubic metres.

On the global front, most of the Asian markets declined in early trade, led by commodity producers, and Tokyo shares fluctuated as investors weighed the Bank of Japan’s policy decision. The BOJ modestly increased purchases of exchange-traded funds, but maintained its base money target at 80 trillion yen ($775 billion) and the pace of purchases of other assets, including Japanese government bonds. In China, shares fell even on buzz the banking regulator's proposals to limit investment in equities through wealth-management products will have limited effect on money flowing into the stock market. Further, investors failed to get any fresh clues from US markets as they closed almost on a flat note.

Back home, stocks from Auto, Oil & Gas and Metal counters were supporting the markets, while those from Capital Goods, Consumer Durables and Banking counters were adding to the underlying cautious undertone. In scrip specific development, Muthoot Finance rallied after the company reported 48% increase in net profit at Rs 270 crore for the quarter ended June 2016 compared with Rs 183 crore in the same quarter last year. Moreover, Eicher Motors (EML) surged after the company reported 58.6% year on year growth in net profit at Rs 376 crore for Q1FY17, on back of healthy revenue.

The market breadth remained optimistic as there were 1204 shares on the gaining side against 946 shares on the losing side, while 164 shares remained unchanged.

The BSE Sensex is currently trading at 28123.65, down by 84.97 points or 0.30% after trading in a range of 28076.48 and 28233.47. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.78%, while Small cap index up by 0.44%.

The top gaining sectoral indices on the BSE were Auto up by 0.94%, Oil & Gas up by 0.94%, Metal up by 0.73%, Power up by 0.45% and Realty up by 0.41%, while Capital Goods down by 0.65%, Consumer Durables down by 0.55%, Bankex down by 0.54%, TECK down by 0.36% and IT down by 0.32% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 1.83%, Bajaj Auto up by 1.79%, Tata Steel up by 1.77%, Hero MotoCorp up by 1.48% and Sun Pharma Inds. up by 1.37%. On the flip side, ICICI Bank down by 3.07%, Bharti Airtel down by 1.75%, HDFC down by 1.48%, Wipro down by 1.32% and Larsen & Toubro down by 1.15% were the top losers.

Meanwhile, India Meteorological Department (IMD), ahead of its second stage monsoon forecast has predicted that with reduced chances of La Nina weather event, the monsoon rainfall this year is likely to be normal and not 'above normal', even though monsoon rains in India were 4 percent below average in the last one week. 

IMD in its second stage forecast issued in June had forecast the average rainfall to be 106% of the normal monsoon rainfall of 89 mm (with +/-4% model error). The July climate outlook issued by IMD's Regional Climate Centre for south Asia expects July, August, September rainfall over India to be more than 100% of the normal rainfall but not above normal 104% to 110%, as forecasted by the IMD.

The experimental Climate Forecast System (CFS) model of Indian Institute of Tropical Meteorology (IITM) too indicated slight reduction in rainfall during August, September based on the initial conditions of June as compared to its forecast based on initial conditions of May. The Australian weather office has also said that the Indian Ocean Dipole (IOD) has strengthened in recent weeks and there are only 50% chances of La Nina. A negative IOD can decrease rainfall over India while La Nina event normally helps rainfall over the Indian sub-continent.

However, Ministry of Earth Sciences (MoES), August and September rainfall are still expected to be 'reasonably okay'. 'It will help fill up reservoirs by September end. Meanwhile, CRISIL in its latest report stated that there is still risk of excess rains and a good spread of rains over time and region in August can help increase GDP growth rate to 7.9% in FY 17. It also expects agriculture to grow by 4 per cent and consumer price inflation to be restricted to 5 per cent in 2016-2017.

The CNX Nifty is currently trading at 8657.10, down by 9.20 points or 0.11% after trading in a range of 8636.20 and 8670.35. There were 34 stocks advancing against 17 stocks declining on the index.

The top gainers on Nifty were Eicher Motors up by 3.65%, Tata Steel up by 2.07%, Bajaj Auto up by 1.79%, Mahindra & Mahindra up by 1.76% and ACC up by 1.65%. On the flip side, ICICI Bank down by 2.96%, BHEL down by 2.24%, Bharti Airtel down by 1.71%, HDFC down by 1.49% and Wipro down by 1.41% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 0.82%, Taiwan Weighted dropped 0.78%, Nikkei 225 slipped 1.1%, KOSPI Index dipped 0.06%, FTSE Bursa Malaysia KLCI shed 0.14% and Shanghai Composite was down by 0.07%. On the flip side, Jakarta Composite was up by 0.44%.