Benchmarks end a lackluster session with moderate cut

The Indian equity markets witnessed a lack-luster and volatile day of trade on Tuesday after showing firm trend in the previous session.  Sentiments came under pressure after India's wholesale price index inflation rose at a faster-than-expected pace in July, gaining 3.35 percent from 1.62 percent in June 2016. Rising for the first time in April after 17 straight months of contraction, WPI inflation has consistently been pushed up by food inflation, which has steadily risen since February. It shot up by 11.82 percent in July after rising by 8.18 percent in June and 7.88 percent in May. Furthermore, Retail inflation, which came last week, also shot up to nearly two-year high of 6.07 per cent in July, well above the Reserve Bank of India’s (RBI’s) comfortable level, on surge in prices of food items as the demand for sugar, oil & fats and spices rose ahead of the festival season. However, Index of Industrial production (IIP) growth surged to 2.1 percent in June as compared to 1.1 percent in May, but remained much below the 4.2 percent growth reported in June 2015, indicating a poor performance of manufacturing sector. Though, gains in commodity counters like Metal and Oil & Gas restricted the market to extend losses. Some support also came with the report that the Bihar State Legislature ratified the Constitution Amendment Bill on Goods and Services Tax (GST) in a special one-day session.

Today’s session was mostly stock specific with corporate news providing some direction. Infosys declined to its lowest level since December 9, 2015, after a key client Royal Bank of Scotland (RBS) scrapped a project to set up a separate bank in the United Kingdom, for which IT major was a key technology partner. On the other hand, good buying was observed in Cipla, which surged by over 7 percent after the company announced an improvement of around 200 basis points in base business EBITDA (earnings before interest, depreciation and taxes) margin. State Bank of India (SBI), the country’s biggest lender has extended gains for second consecutive day after the lender reported a smaller-than-expected increase in bad loans in Q1 FY16.

On the global front, Asian market ended mostly in red on Tuesday as the price of oil took a breather from a three-day rally. Investors were digesting mixed reports on the health of the global economy and awaiting US data later in the week.  Japanese stocks declined sharply as weakness in domestic demand-driven stocks offset gains in cyclicals such as exporters in a relatively quiet holiday-thinned market, while Chinese stocks pulled back from seven-month highs as a sharp correction in bank shares offset sustained strength in the property sector. Meanwhile, European stocks lost ground in early trade, but gains within the commodities group kept the decline somewhat in check.

Back home, after getting a cautious start, the local benchmarks traded in a tight range near their neutral line throughout the morning trade, but witnessed sharp selling in noon trade after the country’s wholesale inflation soared to a 23-month high in July 2016. Besides, weak start of European markets coupled with depreciation in rupee value against the US dollar also weighed on the sentiment. However, late short covering in blue-chip stocks ensured that local bourses go home with relatively small losses. Finally the NSE’s 50-share broadly followed index Nifty, took a cut of over three tens of a percent to settle below the crucial 8,650 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by over eighty points and managed to close above the psychological 28,000 mark. On the BSE sectoral space, information technology (IT), Auto and Realty pockets remained among top laggards in the space as they got lacerated by over half a percent. However, commodity counters like Metal and Oil & Gas managed to go home with gains of around a percent.

The market breadth remained pessimistic, as there were 1110 shares on the gaining side against 1614 shares on the losing side, while 169 shares remained unchanged.

Finally, the BSE Sensex slumped by 87.79 points or 0.31% to 28064.61, while the CNX Nifty dropped 29.60 points or 0.34% to 8,642.55. 

The BSE Sensex touched a high and a low 28199.10 and 27942.65, respectively. The broader indices made mixed closing; the BSE Mid cap index ended up by 0.55%, while Small cap index was lower by 0.01%.

The top gaining sectoral indices on the BSE were Metal up by 1.45%, Oil & Gas up by 0.91%, Capital Goods up by 0.81%, PSU up by 0.74% and Power up by 0.33%, while IT down by 1.31%, TECK down by 1.31%, Auto down by 0.61%, Realty down by 0.54% and Consumer Durables down by 0.43% were the top losing indices on BSE.

The top gainers on the Sensex were Cipla up by 7.14%, Adani Ports &Special up by 6.12%, SBI up by 1.34%, Tata Steel up by 1.17% and Larsen & Toubro up by 1.15%. On the flip side, Sun Pharma down by 2.35%, Tata Motors down by 1.62%, TCS down by 1.50%, Wipro down by 1.38% and HDFC down by 1.36% were the top losers.

Meanwhile, Index of Industrial production (IIP) growth surged to 2.1% in June as compared to 1.1% in May, but remained much below the 4.2% growth reported in June 2015. Industrial output growth was lower on account of poor show by the manufacturing sector and contraction in capital goods production. On cumulative basis, the factory output in the April-June quarter grew by 0.6% compared to 3.3% growth in the year-ago period.

According to the data released by the Ministry of Statistics and Programme Implementation, Central Statistics Office (CSO) IIP, with base 2004-05 for the month of June 2016, the Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month stood at 127.3, 191.3 and 198.9 respectively with the corresponding growth rates of 4.7%, 0.9% and 8.3% as compared to 121.6, 189.5, 183.7 respectively in June 2015. For April-June 2016, this sector’s output over the corresponding period of 2015 has been 2.3%, (-) 0.7% and 9.0% respectively.

The capital goods output registered a steep decline of 16.5% in June over a contraction of 2% in last year. In April-June, the production of these goods, which are considered as barometer for investment, declined by 18% compared to a growth of 2% in year ago period. Growth in output of consumer durables decelerated to 5.6% in June compared to 16.1% a year ago. The consumer non-durable goods also recorded low growth of 1% in June compared to 2.3% a year ago. Overall, consumer goods production recorded a growth 2.8% in June compared to 7.2% a year ago.

In terms of industries, 18 out of 22 industry groups in the manufacturing sector showed positive growth during the month of June. As per Use-based classification, the growth rates in June 2016 over June 2015 were 5.9% in Basic goods, (-) 16.5% in Capital goods and 6.1% in Intermediate goods. The industry group Radio, TV and communication equipment & apparatus showed the highest positive growth of 15.8% followed by 8.8% in Motor vehicles, trailers & semi-trailers and 8.7% in Other transport equipment.

The CNX Nifty traded in a range of 8,682.35 and 8,600.45. There were 22 stocks advancing against 29 decliners on the index.

The top gainers on Nifty were Cipla up by 7.37%, Adani Ports & Special up by 5.98%, Hindalco up by 5.53%, BPCL up by 2.77% and Ambuja Cement up by 1.89%. On the flip side, Bharti Infratel down by 4.23%, Bosch down by 2.38%, Sun Pharma down by 2.32%, HCL Tech down by 2.24% and Tech Mahindra down by 2.24% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 4.53 points or 0.07% to 6,936.66, Germany’s DAX decreased 21.13 points or 0.2% to 10,718.08 and France’s CAC decreased 1.47 points or 0.03% to 4,496.39.

Asian equity markets ended mostly lower on Tuesday, despite Wall Street's three major stock indexes closing at record highs overnight, on the back of a jump in oil prices to nearly five-week highs and renewed expectations for continued monetary policy easing around the globe. Japanese shares hit their lowest level in more than a week on selling pressure in late trades, as the yen strengthened toward 100 per US dollar ahead of a slew of US economic data due later in the day. Chinese stocks too pulled back from seven-month highs as a sharp correction in bank shares offset sustained strength in the property sector. Meanwhile, Hong Kong shares were roughly flat, as they cooled off after reaching their highest point this year