Local markets manages modest gains; Nifty protects 8700 mark

After trading on a feeble note for most part of the session, Indian benchmark indices managed to negotiate a close in the green terrain, breaking the two session downtrend, as investors showed renewed buying interests in Consumer Durables, Banking and PSU counters. Investors’ sentiments got some comfort after the country’s retail inflation slowed to 5.05 percent in August led by easing food prices especially vegetables and making a strong case for the newly appointed RBI governor Urjit Patel to cut rates in the next monetary policy review on October 4, 2016. Lower inflation in vegetables in August helped as the rate of price rise stood at a mere 1.02 percent against 14.06 percent in July.  However, other two microeconomic data came as bummer for domestic markets as India's industrial output fell by 2.4 percent in July after a spurt in May and June, while Wholesale price inflation soared to a two-year high in August to 3.74 percent driven mainly by a gradual increase in prices in the manufacturing sector. A slowdown in industrial activity does not bode well for Asia's third largest economy, especially after overall growth faltered to a 15-month low between April and June.  Furthermore, there were report that India is likely to post its first current account surplus in nine years in the latest quarter, which should bolster the rupee though it is not a good sign for the economy as it reflects weak investment demand at home and subdued exports.

Sentiments got some support with a survey report stating that implementation of Goods & Service Tax (GST) will lead to increased tax compliance and attract more foreign direct investments across sectors due to tax transparency and ease of doing business. Adding the optimism among market participants the private report indicated that the US expressed willingness to have a bilateral investment treaty with India that will boost investor confidence and help increase size of bilateral trade. Meanwhile, many stocks specific activities popup during the session like Hindustan Construction Company (HCC) rallied after the company received a contract worth Rs 181.65 crore from DAE to build premium high rise residential towers at Indira Gandhi Centre for Atomic Research, Kalpakkam in Tamil Nadu. On the other hand, Coal India slipped after the company reported 14.7 per cent decline in consolidated net profit for the quarter ended June 30, 2016. Also, Amtek Auto plunged almost 2.5 per cent after the company reported a net loss of Rs 319.68 crore for the quarter ended June 30, 2016, hit by decline in sales.

On the global front, Asian markets ended lower on Wednesday as investors preferred to hold more cash amid uncertainty over the trajectory of central bank stimulus globally. Chinese market ended in red after a batch of upbeat data diminished the likelihood for additional PBOC stimulus, while the losses in Japanese market were led by banks, on reports that the BOJ is considering delving deeper into negative interest rates. Meanwhile, European stocks edged higher in early trade, shrugging off market jitters over central bank uncertainty and a renewed drop in oil prices.

Back home, the local benchmark indices started the session on cautious note, tracking a weak trend in other Asian markets following a lackluster lead from US markets and a slide in crude prices. Thereafter, the frontline indices traded in tight range near neutral line for most part of the day’s trade, lacking any significant upside triggers as investors engaged themselves in few stocks. However, late short covering in blue-chip stocks and supportive leads from European markets ensured that local bourses go home with some gains. Finally the NSE’s 50-share broadly followed index Nifty, got buttressed by around quarter a percent to settle around the crucial 8,650 support level, while Bombay Stock Exchange’s sensitive Index-Sensex accumulated over fifty points and closed above the psychological 28,050 mark. Moreover, broader markets managed a better close than the larger peers as the BSE’s midcap and smallcap indices settled with gains of 1.34% and 1.19% respectively.

The market breadth remained optimistic as there were 1766 shares on the gaining side against 947 shares on the losing side while 196 shares remained unchanged.

Finally, the BSE Sensex ended up by 18.69 points or 0.07% to 28372.23, while the CNX Nifty gained 11 points or 0.13% to 8,726.60. 

The BSE Sensex touched a high and a low 28416.41 and 28259.38, respectively. There were 17 stocks advancing against 13 stocks declining on the index. The broader indices ended in green; the BSE Mid cap index rose 1.34%, while Small cap index was up by 1.21%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.12%, Bankex up by 0.77%, PSU up by 0.60%, Auto up by 0.57% and Power up by 0.55%, while IT down by 0.67% and TECK down by 0.41% were few losing indices on BSE.

The top gainers on the Sensex were Adani Ports & SEZ up by 2.06%, SBI up by 1.94%, Hero MotoCorp up by 1.71%, Axis Bank up by 1.71% and NTPC up by 1.53%. On the flip side, Coal India down by 1.97%, TCS down by 1.29%, ONGC down by 1.15%, Hindustan Unilever down by 1.06% and Mahindra & Mahindra down by 0.91% were the top losers.

Meanwhile, Global rating agency, Fitch Ratings in its latest report has said that after growing at a robust 7.8 percent in first quarter, India's fuel consumption growth is likely to moderate at around 5-6 per cent in the current fiscal, though the rating agency also expects the consumption growth for petroleum products to remain strong over the medium term.

It has stated that supported by robust passenger- vehicle sales amid low crude-oil prices there is expectation of strong gasoline (petrol) consumption growth of around 9-10 per cent over the medium term. It also expects that an improvement in India's GDP growth will likely boost demand for diesel.

The report stated that higher refining capacity will boost refining volume and meet rising demand for refined products in the next 12-18 months and expects GRMs to remain stronger than the historical average, which together with higher volumes is likely to support strong operating cash flow in FY2016-17.

Fitch expected high capex for all state-owned oil marketing companies (OMCs) - Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL), over the medium term due to their plans to upgrade and expand refining capacity. It also said that there is unlikely to be any under-recoveries, as long as crude prices do not rally significantly from current levels. Regarding the downstream companies, Fitch expects their credit profiles to remain stable, despite large capex, supported by strong volume growth and relatively robust refining margins.

The CNX Nifty traded in a range of 8,739.85 and 8,688.90. There were 31 stocks advancing against 20 decliners on the index.

The top gainers on Nifty were Bank of Baroda up by 4.20%, Yes Bank up by 4.06%, Tata Motors - DVR up by 2.88%, Adani Ports and Special Economic Zone up by 2.77% and ACC up by 2.46%. On the flip side, Bosch down by 2.03%, Coal India down by 1.65%, ONGC down by 1.16%, TCS down by 1.15% and Sun Pharma down by 1% were the top losers.

The European markets were trading in green; UK’s FTSE 100 increased 38.07 points or 0.57% to 6,703.70, Germany’s DAX increased 39.39 points or 0.38% to 10,425.99 and France’s CAC increased 1.1 points or 0.03% to 4,388.28.

Asian markets made a negative close on Wednesday, with some of the indices in the region extending the longest selloff since June, following the overnight decline in US markets on doubts over central banks' willingness or ability to boost growth through ultra-easy monetary policies. Slight gain in crude too was unable to give any support to the markets. Crude oil rose 0.5 percent to $45.11 a barrel in New York following a 3 percent plunge in the last session. Japanese market was dragged down by banks on a report that the Bank of Japan plans to make its controversial negative interest rate policy the centerpiece of future monetary easing. However, Australian shares rose modestly as gains among financials outweighed declines in the mining and energy sectors. South Korean markets were closed for a national holiday.