Weakness continues in market; FMCG and Metal drag

The Indian equity markets came off the day’s low but choppiness continued in the market, which is still trading in the red as investors remained cautious after the Reserve Bank of India (RBI) at its policy meet kept key policy rates unchanged and retains FY17 GDP growth forecast at 7.6%. Inflation at a two-year high has prevented Rajan from cutting interest rates at his final policy review as head of the central bank.  Going forward, RBI indicates that the full implementation of the recommendations of the 7th central pay commission (CPC) on allowances will affect the magnitude of the direct effect of house rents on the retail inflation. RBI also noted that prices of pulses and cereals are rising and services inflation remains somewhat sticky. However, the central bank kept a positive outlook on the economy saying abundant monsoon will help in the recovery. Indian monsoon has been more than plenty this year, leading to better sowing averages. Promises of a better harvest also mean that food inflation could come down in the coming months, creating some space for his successor to cut rates later in the year. Meanwhile , the sentiments also weighed down by the private report that indicate consumer sentiment waned in July this year due to decreasing optimism towards personal finances, business environment, employment and the real estate market.  The MNI India Consumer Sentiment Indicator decreased 2.6 per cent on month-on-month basis to 111.6 in July, offsetting last month's pickup, which had left confidence running at a nine-month high of 114.7.

On the global front, most of the Asian markets were trading with modest gains on Tuesday as gains in commodity stocks helped offset weakness overnight in US markets. Investors’ confidence also improved with the report that Chinese producer deflation eased more than expected to its slowest decline in nearly two years, fuelling hopes the end of a painful slowdown could be in sight for the Asian powerhouse, which is a key driver of the global economy. However, oil prices retreated slightly after reports of a new OPEC meeting sparked a rally.

Back home, stocks from Power, PSU and information technology (IT) counters were supporting the markets, while those from FMCG, Metal and Oil & Gas counters were adding to the underlying cautious undertone. In scrip specific development, Idea Cellular dropped after the company posted a 74 percent decline in the consolidated profit after tax (PAT) to Rs 220.4 crore for the quarter-ended June, compared with Rs 854.8 crore in the same period a year ago. On the other hand, SRF has rallied after the company reported 27 percent year-on-year (YoY) increase in consolidated net profit at Rs 144 crore for the quarter ended June 30, 2016, on back of strong operational performance.

The market breadth remained pessimistic as there were 1038 shares on the gaining side against 1343 shares on the losing side, while 94 shares remained unchanged.

The BSE Sensex is currently trading at 28143.14, down by 39.43 points or 0.14% after trading in a range of 28056.56 and 28289.96. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.15%, while Small cap index down by 0.12%.

The top gaining sectoral indices on the BSE were Power up by 0.57%, PSU up by 0.33%, IT up by 0.20%, TECK up by 0.11% and Bankex up by 0.08%, while FMCG down by 0.78%, Metal down by 0.47%, Oil & Gas down by 0.39%, Consumer Durables down by 0.38% and Auto down by 0.25% were the losing indices on BSE.

The top gainers on the Sensex were NTPC up by 1.25%, ONGC up by 1.00%, Coal India up by 0.83%, Bharti Airtel up by 0.77% and SBI up by 0.67%. On the flip side, HDFC down by 1.35%, Adani Ports &Special down by 1.21%, ITC down by 0.94%, Hero MotoCorp down by 0.80% and Sun Pharma down by 0.59% were the top losers.

Meanwhile, Railway Minister Suresh Prabhu has said that major reforms are underway in the freight sector and with reduction of cargo charges announced in the rail budget for the first time; the benefits in a big way during the coming days will be seen. Prabhu, while pointing that due to non-running of time-tabled freight trains, most of the cargo does not come to railways in the country, said that to change this scenario we have already started a programme and two pairs of time-tabled container trains - ‘Cargo Express’ - have commenced.

Prabhu said that though two-thirds of earnings of Railways come from freight traffic, we did not focus on this and because we ignored it, the railways’ share in cargo has been on the decline and in the coming days it will be a matter of concern how the railways will support itself.

The Rail minister further said that for the first time in the history of rail budget, from this year we have initiated to bring down the cargo charges. The reforms going on in freight sector in the country are mind-boggling, and the reforms will benefit railways in the coming days. Minister added that efforts were also on to reduce expenditure on power. Indian Railways, which is a big consumer of electricity, is on energy saving mission. In order to minimize the consumption of power, Railways was tapping renewable energy sources, illuminating the stations through LED lighting, practice of prudent energy audit methods in a big way.

The CNX Nifty is currently trading at 8694.95, down by 16.40 points or 0.19% after trading in a range of 8671.25 and 8728.35. There were 24 stocks advancing against 26 stocks declining on the index, while one stock remained unchanged.

The top gainers on Nifty were Tata Power up by 4.33%, NTPC up by 1.25%, Bharti Infratel up by 0.92%, ONGC up by 0.91% and Coal India up by 0.90%. On the flip side, Idea Cellular down by 5.29%, Ambuja Cement down by 2.33%, HDFC down by 1.33%, Hindalco down by 1.31% and Adani Ports &Special down by 1.27% were the top losers.

Asian markets were trading mostly in green; Shanghai Composite increased 0.48%, KOSPI Index jumped 0.62%, Taiwan Weighted rose 0.13% and Nikkei 225 was up by 0.63%. On the flip side, Hang Seng decreased 0.07%, Jakarta Composite shed 0.35% and FTSE Bursa Malaysia KLCI was down by 0.19%.