Indian benchmarks end a dull session with modest cut; broader markets outclass blue-chips

It turned out to be a lackadaisical performance from Indian benchmark indices on Wednesday, as they failed to snap the session in the green territory and settled marginally below the neutral lines. The frontline gauges took a breather, after closing at record highs for the previous sessions, as investors waited for gross domestic product (GDP) data due later in the day and searched for fresh corporate triggers with the results season coming to an end. According to India’s former chief statistician Pronab Sen, the country’s GDP for 2016-17 will get 50 basis points (bps) push to 7.6 percent from the government’s estimate of 7.1 percent, due to the recent revision of the base year of the Wholesale Price Index (WPI) and the Index of Industrial Production (IIP).

Further, investors around the world also turned cautious after a powerful bomb exploded in the morning rush hour in the centre of Kabul on Wednesday, killing at least 80 people, wounding hundreds and sending clouds of black smoke into the sky above the presidential palace and foreign embassies. However, losses remained capped with the Moody's Investors Service’s report stating that Indian economy will grow by 7.5 per cent in the current fiscal year, 7.7 per cent in 2018-19 and will reach to around 8 per cent in 3-4 years on the back of government's various reforms. Some support also came with report that Southwest monsoon arriving in Kerala on the expected date this year and also advancing into some parts of the Northeast India. Also, Prime Minister Narendra Modi while speaking at the Indo-German Business Summit in Berlin said that India has one of the most liberal FDI policy regimes in the world and more than 90 percent of foreign investment flows are under automatic route. Meanwhile, Aviation stocks gained traction on expectations that a slide in oil prices would reduce carriers' fuel cost, which typically constitute about 50% of airlines' operating costs.

On the global front, Asian markets ended mixed on Wednesday, as investors turned cautious amid political worries in Europe as well as weaker commodity markets. Japanese stocks dropped after weakness in US shares and a stronger yen hurt sentiments, while sliding oil prices dragged down the mining sector. However, investors got some confidence after China reported official manufacturing PMI for May at 51.2, compared with a level of 51.0 seen, and steady with 51.2 in April. The non-manufacturing PMI came in at 54.5, up from a level last at 54.0 in April. A figure above 50 denotes expansion. In commodities, oil prices remained soft, as concerns lingered about whether the extension of output cuts by OPEC and other producing countries will be enough to support prices.

Back home, the benchmark got off to a cautious start, tracking the dismal leads prevailing in Asian markets. Thereafter, the indices kept oscillating in a narrow range through the day’s trade. Eventually, the NSE’s 50-share broadly followed index - Nifty settled with trivial losses of three points above the psychological 9,600 levels, while Bombay Stock Exchange’s Sensitive Index - Sensex shed thirteen points and closed above the psychological 31,100 mark. Moreover, broader market outperformed the frontline indices with the S&P BSE Midcap and the S&P BSE Smallcap indices rising up to 1%. The market breadth remained in favor of advances, as there were 1380 shares on the gaining side against 1289 shares on the losing side, while 182 shares remain unchanged.

Finally, the BSE Sensex lost 13.60 points or 0.04% to 31145.80, while the CNX Nifty was down by 3.30 points or 0.03% to 9,621.25. 

The BSE Sensex touched a high and a low of 31255.28 and 31107.48, respectively and there were 14 stocks on gaining side as against 16 stocks on the losing side.

The broader indices ended in green; the BSE Mid cap index gained 0.94%, while Small cap index was up by 1.05%.

The top gaining sectoral indices on the BSE were Utilities up by 1.03%, Realty up by 0.97%, Consumer Disc up by 0.80%, Consumer Durables up by 0.78% and Auto up by 0.69%, while Metal down by 1.43%, IT down by 0.77%, TECK down by 0.65% and Energy down by 0.55% were the top losing indices on BSE.

The top gainers on the Sensex were Mahindra & Mahindra up by 3.99%, Lupin up by 2.75%, GAIL India up by 2.62%, Power Grid up by 1.89% and ICICI Bank up by 1.76%. On the flip side, Infosys down by 1.96%, Coal India down by 1.42%, Sun Pharma down by 1.36%, Reliance Industries down by 1.34% and Tata Steel down by 1.14% were the top losers.

Meanwhile, domestic rating agency, ICRA in its latest report has said that steel mills in India likely to benefit from lower iron ore and coking coal prices in the current year. Though, it also said that continued weakness in demand remains a worry for the steel industry with a growth of mere 4.6 percent and 2.6 percent in FY16 and FY17 respectively, due to sluggishness in key end-user industries. It added that weak demand conditions have also led to a correction in domestic hot rolled coil (HRC) prices by 7 percent in May 2017.

The ratings agency has said that prices of seaborne iron ore have corrected by 36% between February and May of 2017, pulled down by a correction in Chinese steel prices, rising inventory levels at Chinese ports, and addition of low cost fresh supplies from Australia and Brazil. It also said that during this period, domestic lump ore prices have shown a diverging trend, rising by around 4 percent. However, it added that this weakening in seaborne prices will make iron ore exports by domestic miners less remunerative, which could lead to higher domestic supplies along with a correction in domestic ore prices in the coming months.

According to the report, seaborne prices of coking coal, the other key steelmaking ingredient for which India depend on largely on Australian exports, have also witnessed a sharp decline from $314/million tonnes (MT) in mid-April 2017 to $170/MT in mid-may 2017 after the resumption of supplies from Queensland post the disruption caused by cyclone Debbie during April 2017. Besides, in the financial year 2016- 17, domestic steel production grew by 10.7 percent, buoyed by the government's trade protection measures and favourable export realisations, which led to a decline in India's steel imports, and a doubling of steel exports.

The CNX Nifty traded in a range of 9,649.60 and 9,609.25. There were 22 stocks in green as against 29 stocks in red on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 3.86%, Indiabulls Housing Finance up by 3.31%, Ultratech Cement up by 2.86%, Lupin up by 2.64% and IOC up by 2.29%. On the flip side, Vedanta down by 2.61%, Infosys down by 2.02%, Aurobindo Pharma down by 1.77%, Coal India down by 1.72% and Tata Power down by 1.70% were the top losers.

The European markets were trading mostly in green; UK’s FTSE 100 increased 20.36 points or 0.27% to 7,546.87, Germany’s DAX increased 14.97 points or 0.12% to 12,613.65, while France’s CAC decreased 0.84 points or 0.02% to 5,305.10.

Asian equity markets made a mixed closing on Wednesday as a stronger yen and a fall in oil prices ahead of weekly US industry inventory estimates later in the day offset better-than-expected manufacturing data from China. Japanese shares ended lower as the dollar hit two-week lows against the yen after mixed US data released overnight and new poll results showing that UK Conservatives could fall short of overall majority in next month's national election. Meanwhile, Chinese shares ended higher after data showed activity in China's manufacturing sector grew faster than expected in May. China's manufacturing sector continued to expand in May and at a steady pace, with a manufacturing PMI score of 51.2. That's unchanged from the April reading and surpassed expectations for 51.0. The non-manufacturing PMI came in with a score of 54.5 up from 54.0 in the previous month.