Bulls take breather after three straight days of rally

Bout of volatility in last leg of trade dragged the Indian benchmarks slightly lower on Thursday and stock markets witnessed consolidation after three days of rally, as investors lacked conviction to open fresh positions. Key gauges made a cautious start and oscillated in an extremely tight range in first half of trade with India’s economic growth rate slipped to 6-quarter low of 7.1 percent in April-June, as compared to 7.9 percent in the previous quarter, mainly due to subdued performance of mining, construction and farm sectors. The economy had expanded at 7.5 percent in the April-June quarter of last financial year, 2015-16. Sentiments were also weighed down with the Core Sector growth slowing to 3.2 percent in July, compared to 5.2 percent recorded in June. However, the cumulative growth of the sector during April-July period of the fiscal was 4.9 percent. Meanwhile, fiscal deficit in the first four months of the current financial year reached to Rs 3.93 lakh crore, or 73.3 percent of the Budget estimates for 2016-17.

Markets regained momentum in second half  of trade with report of manufacturing sector growth touching a 13-month high in August, bolstered by expansion in new works as well as acceleration in buying and production levels. The Nikkei India Manufacturing PMI jumped to 52.6 in August from 51.8 in July as “Indian manufacturers enjoyed a solid improvement in operating conditions” last month. But, sharp wave of selling in final hour of trade dragged markets lower and local bourses ended the session slightly in red. 

On the global front, European markets were trading mostly in green in early deals. Asian markets ended mostly in red after lower crude oil prices dragged Wall Street and a pair of Chinese manufacturing surveys did little to inspire investors as markets waited to see if US employment data could put the Federal Reserve on track to hike interest rates.

Back home, depreciation in Indian currency dampened sentiments. The rupee was trading a tad weak at 66.98 at the time of equity markets closing on mild dollar demand from banks and importers. Telecom stocks witnessed selling after Reliance Industries announced the launch of Reliance Jio with disruptive pricing strategy in addition to voice calls and national roaming free of cost. Cement companies too slumped after the Competition Commission of India (CCI) imposed more than Rs 6,700 crore penalties on 11 cement companies for cartelisation.

On the flip side, select stocks related to infrastructure counter traded with traction, as the government announced a package of measures to revive the construction sector, putting in place a mechanism to release funds stuck in arbitration awards to revive stalled projects. Auto stocks remained on buyers’ radar after companies like M&M, Maruti Suzuki and Atul Auto reported strong August sales numbers.

The NSE’s 50-share broadly followed index -- Nifty -- slipped by ten points to end slightly below the psychological 8,800 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex -- declined around thirty points but managed to hold its psychological 28,400 mark. Broader markets too struggled to get some traction and ended the session with a cut of around half a percent. The market breadth remained in the favour of decliners, as there were 1,077 shares on the gaining side against 1,656 shares on the losing side while 169 shares remain unchanged.

Finally, the BSE Sensex shed 28.69 points or 0.10% to 28,423.48, while the CNX Nifty slipped 11.55 points or 0.13% to 8,774.65. 

The BSE Sensex touched a high and a low 28548.85 and 28386.61 respectively. There were 16 stocks advancing against 13 stocks declining on the index. The broader indices ended in red; the BSE Mid cap index declined 0.38%, while Small cap index was down by 0.39%.

The top gaining sectoral indices on the BSE were Auto up by 0.35%, Metal up by 0.32%, FMCG up by 0.21%, Finance up by 0.14% and Bankex up by 0.09%, while Realty down by 2.00%, Energy down by 1.30%, TECK down by 1.00%, Power down by 0.91% and Oil & Gas down by 0.81% were the top losing indices on BSE.

The top gainers on the Sensex were GAIL India up by 2.06%, Coal India up by 1.32%, ICICI Bank up by 1.24%, Lupin up by 1.21% and Tata Motors up by 1.15%. On the flip side, Bharti Airtel down by 6.37%, Reliance Industries down by 2.73%, Adani Ports & Special down by 1.43%, Wipro down by 1.33% and HDFC Bank down by 0.81% were the top losers.

Meanwhile, India’s manufacturing activity expanded at its fastest pace in 13 months in August, with pickup in demand from domestic and external markets. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) - a composite single-figure indicator of manufacturing performance - surged to 52.6 in August from 51.8 in July.

Manufacturing PMI showed positive momentum at the beginning of second semester, carried over into August, with expansion rates for new work, buying levels and production accelerating further. The new orders sub-index, which takes into account both domestic and external demand, was 54.8 in August - its highest since December 2014 and indicating robust demand for Indian manufactured goods. Buying levels were also raised, as companies attempted to build inventory levels. The upturn in purchasing activity was moderate, but the rate of growth was at a 12-month high.

According to survey, higher prices paid for petrol and other raw materials led overall cost burdens faced by Indian manufacturers to rise further. Further survey highlighted an increasing degree of pressure on the capacity of manufacturers’ operations as backlogs rose to the greatest extent since December 2013. On the price front, softer increases in input costs and output charges and, in both cases, inflation rates were below their respective trends.

Sharp upturn was seen in new business inflows, which expanded at the fastest pace since December 2014. Consumer goods producers led the increase, and solid growth was also seen in the intermediate and capital goods categories.

The CNX Nifty traded in a range of 8,813.25 and 8,759.95. There were 24 stocks advancing against 27 decliners on the index.

The top gainers on Nifty were GAIL India up by 2.04%, HDFC up by 1.37%, Coal India up by 1.35%, Lupin up by 1.32% and Tata Steel up by 1.22%. On the flip side, Idea Cellular down by 10.49%, Bharti Airtel down by 6.27%, Reliance Industries down by 2.91%, BPCL down by 2.62% and BHEL down by 2.62% were the top losers.

European markets were trading mostly in green; France’s CAC surged 43.01 points or 0.97% to 4,481.23 and Germany’s DAX was up by 47.67 points or 0.45% to 10,640.36, while UK’s FTSE 100 was down by 4.27 points or 0.06% to 6,777.24.

The Asian markets ended mostly in red on Thursday as investors cautiously awaited US jobs data, due Friday, for clues on the timing of a possible interest rate hike by the Federal Reserve. A recent report from payroll processor ADP, showed that private US employers continued to hire at a solid clip in August, adding 177,000 workers, raised expectations for strong nonfarm-payroll numbers. Chinese shares ended a tad lower, dragged down by financials and property developers as better-than-expected manufacturing data reinforced growing views among investors that China's central bank will be in no hurry to inject further stimulus. However, Japanese shares hit a three-month closing high, as the dollar/yen paid held above 103 and latest survey data signaled an increase in Japanese manufacturing output for the first time in six months.