Benchmarks pare some early losses; still continue to trade in red

Recovering from day’s low, Indian benchmark indices have gained momentum however were still trading below the neutral line as investors indulged in cutting down their bets on disappointing macroeconomic data and a weak trend in Asian markets. While the NSE’s 50-share broadly followed index Nifty traded above its crucial 8700 mark, Bombay Stock Exchange’s Sensitive Index Sensex protected its psychological 28,300 mark. Sentiments remained downbeat with the report that India's industrial growth fell sharply in July after rising for two months, with data suggesting that the monsoon has not revived rural demand and investments are yet to pick up.  Growth as measured by the Index of Industrial Production (IIP) contracted 2.4% in July, led by a 3.4% fall in manufacturing and a 0.8% rise and a 1.6% gain in mining output and power generation, respectively.  However, investors received some comfort with India Ratings and Research’s report indicating that the sharp fall in retail inflation in August increased the chances of monetary easing by the central bank. India's retail inflation slowed to 5.05% in August led by easing food prices especially vegetables. Some support also came 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.

On the global front, Asian markets were trading mostly in red on Wednesday after a report showed fund managers are hoarding more money in cash amid uncertainty over the trajectory of central bank stimulus globally. The Chinese market was 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. Overnight, US stocks closed sharply lower, led by energy, as investors digested a spike in volatility and falling oil prices.

Back home, stocks from Realty, Banking and PSU counters were supporting the markets, while those from Metal, Auto and Capital Goods counters were adding to the underlying cautious undertone. In scrip specific development, Gitanjali Gems has touched its 52-week high, after the company's net profit more than doubled to Rs 57 crore for the quarter ended June 30, 2016, mainly due to lower interest cost. Furthermore, Hindustan Construction Company (HCC) rallied after the company has been awarded Rs 181.65 crore contract by the Department of Atomic Energy (DAE) to build premium high rise residential towers at Indira Gandhi Centre for Atomic Research, Kalpakkam in Tamil Nadu.

The market breadth remained optimistic as there were 1457 shares on the gaining side against 854 shares on the losing side, while 150 shares remained unchanged.
The BSE Sensex is currently trading at 28303.62, down by 49.92 points or 0.18% after trading in a range of 28259.38 and 28416.41. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.44%, while Small cap index up by 0.69%.

The top gaining sectoral indices on the BSE were Realty up by 0.41%, Bankex up by 0.36%, PSU up by 0.29%, Power up by 0.21% and Oil & Gas up by 0.18%, while Metal down by 0.76%, Auto down by 0.27%, Capital Goods down by 0.16%, IT down by 0.15% and TECK down by 0.07% were the losing indices on BSE.

The top gainers on the Sensex were NTPC up by 1.93%, Adani Ports &Special up by 1.46%, Cipla up by 1.42%, Asian Paints up by 1.35% and SBI up by 1.17%. On the flip side, Coal India down by 2.09%, Tata Steel down by 1.81%, ONGC down by 1.47%, Tata Motors down by 1.39% and TCS down by 1.23% were the top losers.

Meanwhile, Index of Industrial production (IIP) contracted by 2.4% in July 2016, as compared to July 2015 and an expansion of 1.95 per cent in the month before, standing at 176.1 mainly on account of weakness in manufacturing and contraction in capital goods production. The industrial growth has declined after two consecutive months of growth. On cumulative basis, the factory output in April-July declined to -0.2% compared to 3.5% 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 July 2016, the Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of July 2016 stand at 118.7, 184.5 and 193.3 respectively, with the corresponding growth rates of 0.8%, (-) 3.4% and 1.6% as compared to July 2015. The cumulative growth in these three sectors during April-July 2016 over the corresponding period of 2015 has been 2.0%, (-) 1.4% and 7.1% respectively.

Growth in output of consumer durables decelerated to 5.9% in July compared to 10.5% a year ago. The consumer non-durable goods output declined by 1.7% in July against 4.4% contraction a year ago. Overall, consumer goods production recorded a growth 1.3% in July compared to 1.1% a year ago. The capital goods output registered a steep decline of 29.6% in the month against a growth rate of 10.1% in last year. Power generation recorded a growth of 1.6% in July compared to 3.5% in the same month a year ago.

In terms of industries, 12 out of the 22 industry groups in the manufacturing sector have shown negative growth during the month of July 2016 as compared to the corresponding month of the previous year. The industry group Electrical machinery & apparatus n.e.c. has shown the highest negative growth of (-) 59.2% followed by (-) 16.8% in Medical, precision & optical instruments, watches and clocks and (-) 16.2% in Wearing apparel; dressing and dyeing of fur. On the other hand, Tobacco products has shown the highest positive growth of 22.3%, followed by 12.3% in Coke, refined petroleum products & nuclear fuel and 10.9% in Radio, TV and communication equipment & apparatus.

The CNX Nifty is currently trading at 8702.85, down by 12.75 points or 0.15% after trading in a range of 8688.90 and 8737.60. There were 25 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Bank of Baroda up by 2.97%, NTPC up by 2.06%, Yes Bank up by 1.65%, Tech Mahindra up by 1.65% and Asian Paints up by 1.33%. On the flip side, Coal India down by 2.10%, Tata Steel down by 1.88%, ONGC down by 1.61%, Tata Motors down by 1.45% and TCS down by 1.23% were the top losers.

Asian markets were trading mostly in red; Jakarta Composite declined 1.46%, Nikkei 225 decreased 0.59%, Taiwan Weighted shed 0.43%, Shanghai Composite fell 0.58% and FTSE Bursa Malaysia KLCI was down by 0.95%. On the flip side, KOSPI Index increased 0.4% and Hang Seng was up by 0.04%.