Indian benchmarks decline for second straight session; Sensex protects 28000 mark

Indian benchmark indices showed a volte-face on the first day of a new trading week as what started on a promising note ended as a gloomy show. The optimism in domestic markets petered out completely by the end of trade and the benchmarks even drifted in to the negative territory for second consecutive session despite getting off to a gap-up opening.  Marketmen were optimistic in early part of the session, as the government is going to table the Constitutional Amendment Bill for introduction of GST in Rajya Sabha for consideration and passage this week. The proposed tax reform, the biggest since India's independence from Britain in 1947, seeks to replace a slew of federal taxes and levies in 29 states, transforming the nation of near 1.3 billion people into a customs union. Sentiments got further support with the report that manufacturing activities gathered pace slightly in July compared to the previous month to post a four-month high expansion, on high demand from both domestic and external markets. The widely-tracked Nikkei purchasing managers' index (PMI) inched up to 51.8 points in July against 51.7 in the previous month, indicating a further improvement in overall business conditions across the sector. However, the sanguinity in local markets was under check as profit booking in Capital Goods and rate sensitive Banking counters exerted downside pressure on the frontline indices and dragged them below to the psychological 8,650 (Nifty) and 28,100 (Sensex) levels.

Banking stocks declined on account of sharp selloff in ICICI Bank amid weak June quarter results. ICICI Bank reported a 22 percent year-on-year (YoY) fall in its consolidated net profit at Rs 2515.85 crore in the June quarter, compared with Rs 3232.37 crore in the same period a year ago. However, good buying was observed in auto stocks post better July sales numbers by many large automakers. Maruti Suzuki India registered a rise of 12.7 percent in its total car sales (Domestic + Export) for the month of July 2016 at 137,116 units, as against 121,712 units in July 2015.  Mahindra & Mahindra reported a 14 percent rise in total sales to 39,458 units in July 2015 as against 34,652 units during July 2015. Also, Metal stocks gained with the Union Minister for Steel Birender Singh stating that the Centre is making all efforts to boost steel production so that India could become the second largest steel producer in the world.

On the global front, Asian markets ended mostly in green on Monday as investors turned optimistic on expectations that the US Fed won't hike rates after lower-than-expected second quarter US GDP data. US GDP in April-June quarter grew 1.2 percent against the expectations of around 2.6 percent.  Japanese shares erased earlier losses to close a tad higher as the yen's rally paused. However, Chinese shares bucked the trend and sold off, as China’s July Purchasing Manager Index (PMI) cast doubts over the strength of the world’s second largest economy, inching down to 49.9 from 50 in June. Meanwhile, European stocks edged lower in early trade, as investors reacted to European banking stress tests and new Chinese data.

Back home, the benchmark got off to a rollicking opening as investors rejoiced after the government listed the much-awaited GST Bill for consideration and passage in Rajya Sabha’s agenda for this week. The indices in no time climbed to intraday highs and traded around the psychological 28,200 (Sensex) and 8,700 (Nifty) levels through the morning trades. But the optimism soon started showing signs of easing in late hours of trade and profit booking in few sectors, while drifting European markets too weighed down the local bourses by the end of session. Finally the NSE’s 50-share broadly followed index Nifty, settled with single digit loss above the crucial 8,600 support level, while Bombay Stock Exchange’s Sensitive Index Sensex was down by forty eight points but managed a close above the psychological 28,000 mark. Moreover, the broader markets showed some resilience and settled on a positive note, outperforming their larger peers by quite a margin.

Finally, the BSE Sensex declined by 48.74  points or 0.17% to 28003.12, while the CNX Nifty lost 1.95 points or 0.02% to 8,636.55.

The BSE Sensex touched a high and a low 28284.85 and 27873.53, respectively. The broader indices made a positive closing; the BSE Mid cap index ended up by 0.38%, while Small cap index was up by 0.10%.

The top gaining sectoral indices on the BSE were IT up by 1.76%, TECK up by 1.54%, Metal up by 1.31%, Auto up by 0.47% and Consumer Durables up by 0.07%, while Capital Goods down by 2.34%, Bankex down by 1.18%, FMCG down by 0.52%, PSU down by 0.22% and Realty down by 0.21% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 3.03%, Tata Steel up by 2.71%, Maruti Suzuki up by 2.41%, Wipro up by 2.33% and Dr. Reddys Lab up by 1.62%. On the flip side, ICICI Bank down by 5.19%, Larsen & Toubro down by 4.12%, Adani Ports &Special down by 1.68%, Lupin down by 1.00% and SBI down by 0.70% were the top losers.

Meanwhile, manufacturing sector growth continued its uptrend and hit a four-month high in July, backed by stronger upturn in new business orders. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) - a composite single-figure indicator of manufacturing performance - rose to 51.8 in July from 51.7 in June. The upward movement in the headline index came from stronger contributions from four of its five components, the exception being suppliers’ delivery times.

According to the survey, greater demand from both the domestic and external markets, total new business rose at the fastest pace since March supporting the PMI. The expansion in order books was led by consumer goods producers. Growth of new export orders climbed to a six-month high, with increases seen in the consumer and capital goods categories. Further, Indian manufacturers stepped up production, with July’s upturn being the most pronounced since March. 

As per the report, the July data highlighted ongoing pressure on the capacity of Indian manufacturers, as outstanding business rose for the second month in succession. Furthermore, the rate of backlog accumulation was the fastest in one-and-a-half years. Despite this, hiring trends remained relatively muted with, only 1% of surveyed companies took on additional workers in July, while almost all the remaining respondents signaled no change in payroll numbers.

On the price front, July saw input costs rise at the slowest pace in five months. Although charge inflation accelerated, the rate of increase was only slight and remained below its long-run average. Besides, supplier performance improved for the first time since February. Some respite came to firms with cost burdens rising at a modest and slower rate and the improving demand environment meant that businesses were able to raise their own charges in July.

The CNX Nifty traded in a range of 8,711.30 and 8,590.50. There were 29 stocks on gainers side against 22 decliners on the index.

The top gainers on Nifty were HCL Tech up by 3.46%, TCS up by 3.25%, Tata Steel up by 2.72%, Hindalco up by 2.58% and Grasim up by 2.44%. On the flip side, ICICI Bank down by 4.91%, Larsen & Toubro down by 3.99%, BHEL down by 2.67%, Bank of Baroda down by 2.64% and Adani Ports &Special down by 1.57% were the top losers.

The European markets were trading mostly in red; UK’s FTSE 100 decreased 3.57 points or 0.05% to 6,720.86, France’s CAC decreased 20.31 points or 0.46% to 4,419.83, while Germany’s DAX increased 24.56 points or 0.24% to 10,362.06.

Asian equity markets ended mostly higher on Monday, as reduced bets on US interest-rate increase, steadier oil prices, a weaker yen and the latest European stress tests painted a broadly positive picture of the region's 51 largest banks, helping investors shrug off mixed data out of China. A Commerce Department report showed on Friday that US GDP climbed by 1.2 percent in the second quarter following a downwardly revised 0.8 percent increase in the first quarter. Economists had expected GDP to jump by 2.6 percent. Traders pared bets the Federal Reserve will increase interest rates this year despite Federal Reserve Bank of San Francisco President John Williams and Federal Reserve Bank of New York President William Dudley playing down the low reading on second-quarter US growth. This Friday's US jobs report will be more important to the Fed and markets to determine whether there will be at least one rate hike in 2016. Meanwhile, Japanese shares erased earlier losses to close a tad higher as the yen's rally paused, and on financials gains after the Bank of Japan refrained on Friday from charging more interest to institutions for parking their excess reserves at the central bank. Chinese shares bucked the trend and sold off, as a slew of reports painted a mixed picture of the world's second-largest economy. China’s official manufacturing purchasing managers index unexpectedly fell into contraction at 49.9 for July as against 50.0 in June. While, the Caixin manufacturing PMI rose for the first time in 17 months with a score of 50.6 in July, well above a reading of 48.7 expected and up from 48.6 the previous month.