Sensex squanders a firm start; snaps three session gaining streak

Wednesday trading session turned out to be absolutely fruitless for stock markets in India as the benchmark equity indices failed to sustain the gains they amassed in the early part of session. The frontline gauges remained range bound for through the day but drifted to lower levels in the last leg of trade to settle with trivial losses.

Coming after a day’s holiday, the benchmark gauges got off to a promising start, tracking sanguine cues, which the Asian markets exhibited as sentiments got supported by the unexpectedly strong manufacturing reports from the US and China, the two top economies of the world, which lifted risk appetite of investors.

Earlier in the day, market participants traded with conviction after telecom major Bharti Airtel announced its fourth quarter earnings, which were unexpectedly better than the street’s estimates. In addition the FMCG bellwether HUL and leading two-wheeler maker Hero Moto too announced quarterly results which were better than expected and supported sentiments.

Cable companies including Hathway and WWIL rallied in the session after TRAI’s notification on digitizing cable TV distribution recommended a mandatory 'carriage fee' - or, the money that broadcasters have to pay to cable companies for them to carry their channel.

However, the upside for the benchmark gauges was capped since a HSBC survey indicated that India's manufacturing sector inched up in April, supported by rising order books, but slower output growth and rising price pressures dampened sentiment. Also, another data showed growth in India’s eight core industries' slowed down to 2% in March as against 6.5% in the same month last year reflecting a slowdown in the economy.

Moreover, the Indian rupee breached the 53 mark against the US dollar to reach the lowest levels in around four months on sustained American greenback demand which undermined market mood and raised concerns over slowing economic activity and drying inflows from foreign funds.

Besides, market men were also seen squaring off hefty positions from the rate sensitive Automobile counter, which plunged over one and half a percent after heavyweights like Maruti and Tata Motors reported disappointing monthly sales numbers. Power sector remained another laggard in the session as it went home with over a percent cut after majors like Tata Power and NTPC suffered heavy pounding.

On the global front, cues from Asian region remained enthusiastic with most markets surging around a percent. Sentiments in the region were largely influenced by the strong overnight close on Wall Street on the back of encouraging US manufacturing data which came in better than expected and offset the concerns over world’s largest economy’s recovery prospects.

In addition, the manufacturing index in China unexpectedly spiked to a 13 month high levels in April, indicating industrial activity expanded for a fifth month in the world's second-largest economy and suggesting that the economy is growing at a robust rate. On the other hand, the European markets after a gap-up opening, pared part of its gains after data showed unemployment for the European region hit a new euro-era high.

The NSE’s 50-share broadly followed index Nifty, logged single digit loss to settle below the psychological 5,250 support level while Bombay Stock Exchange’s Sensitive Index - Sensex fell by seventeen points to finish above the crucial 17,300 mark. Moreover, the broader markets too finished on a flat note but the Small Cap index managed to outperform all its larger peers as they settled with gains of two tenth of a percent.

The markets rose on weak volumes of over Rs 1.05 lakh crore while the turnover for NSE F&O segment remained on the higher side as compared to that on Monday, at over Rs 0.69 lakh crore. The market breadth turned pessimistic by the end as there were 1,333 shares on the gaining side against 1,465 shares on the losing side while 135 shares remained unchanged.

Finally, the BSE Sensex lost 16.90 points or 0.10% to settle at 17,301.91, while the S&P CNX Nifty declined by 9.00 points or 0.17% to close at 5,239.15.

The BSE Sensex touched a high and a low of 17,432.33 and 17,265.48 respectively. The BSE Mid cap down by 0.27% and Small cap index up by 0.20%.

The major gainers on the Sensex were DLF up by 2.73%, Bharti Airtel up by 2.47%, Hindustan Unilever up by 2.08%, TCS up by 1.83%, and Cipla up by 1.80% while Tata Motors down by 3.82%, Maruti Suzuki down by 2.76%, Tata Power down by 2.27%, Coal India down by 1.90% and Bajaj Auto down by 1.85% were the major losers on the index.

The major gainers on the BSE sectoral space were Consumer Durables (CD) up by 2.41%, TECk up by 0.97%, IT up by 0.73%, Bankex up by 0.27% and FMCG up by 0.21%, while Auto down by 1.72%, Power down by 1.25%, Capital Goods down 0.94%, Oil & Gas down by 0.58% and PSU down by 0.56% were major losers on the BSE sectoral space.

Meanwhile, the data of Purchasing Managers’ Index (PMI) suggests that factory output has inched up in April, supported by bulging order books. However, growth slowed down due to supply side constraints and inflationary pressures. Also prices of output have gone up. The HSBC India Manufacturing Purchasing Managers' Index (PMI), compiled by Markit, rose marginally to 54.9 in April from 54.7 in March. The index has remained above the 50-mark that divides growth from contraction for more than three years now.

New orders continued to pour in, including those for exports. The new orders sub-index rose to 61.1 in April after falling to 58.1 in March, buoyed by strong exports. However, manufacturers found it difficult to meet their commitments due to power shortages. As a result, backlogs of work increased substantially. In fact manufacturers have had to dip into inventory to meet their clients’ requirements.

Further the input price sub-index has moved up quite sharply. The PMI survey showed the costs of raw materials grew at their fastest pace since August. As a result, the output price sub-index, which saw a deceleration in March to 54.1 after remaining at around 56 for several months, is back up to 58.7 in April.

Given the numbers one can deduce that upside risks to inflation remain. It also suggests that the RBI’s reading that core inflation is coming down may be premature and the rate cuts a bit too aggressive. The upshot is that the new orders/ inventory ratio has gone up in April, which means that growth should remain strong in May too, as producers replenish inventory.

The S&P CNX Nifty touched a high and low of 5,279.60 and 5,226.45 respectively.

The top gainers on the Nifty were DLF up by 2.89%, Bharti Airtel up by 2.51%, Cipla up by 1.97%, HUL up by 1.96% and PNB up by 1.86%.

On the flip side, Tata Motors down by 3.55%, Maruti Suzuki down by 3.42%, Grasim down by 2.63%, ACC down by 2.45%, and Ambuja Cement down by 2.39% were the top losers on the index.

The European markets were trading mixed, as France's CAC 40 up 0.48%, Britain’s FTSE 100 down 0.56%, while Germany's DAX was up by 0.20%.

Buoyed by strong US factory activity data, Asian equity indices rallied on Wednesday as it raised hopes that the world’s biggest economy remained on a recovery track. Moreover, the sentiment also got some boost after growth in Asian manufacturing improved broader sentiment. The HSBC China Purchasing Managers’ Index (PMI), geared to smaller firms, improved to 49.3 in April from 48.3 in March, showing that the rate of deterioration had slowed following a difficult first quarter.

Meanwhile, China shares climbed 1.76 percent to highest closing level in seven weeks, after the country’s securities regulator said it would reduce transaction fees for trades on the Shanghai and Shenzhen stock exchanges. The China Securities Regulatory Commission said on Monday that it would reduce transactions fees collected by both the stock exchanges and the official clearing house starting June 1. It estimated the combined impact would be 3 billion yuan ($475.42 million) less fees collected in a year, a reduction of 25 percent.

South Korean KOSPI surged about a percentage point after South Korea’s manufacturing activity expanded for a third straight month in April, but at a slower pace than in March, backed by a continued rise in new export orders. The PMI was at a seasonally adjusted 51.9 in April, down from 52.0 in March. However, the Taiwan PMI fell to 51.2 in April from 54.1 in March as manufacturers reduced output prices in line with softening demand conditions, despite registering continued cost inflation. A reading above 50 indicates expansion in manufacturing activity.