Sensex dips to day’s lows; trades in a narrow range in noon session

Stock markets in India continued to trade on an uninspiring note in Wednesday afternoon trades as the benchmark equity indices extended their streak of consolidation for the third straight session. It is turning out to be a choppy session of trade. The psychological 17,400 (Sensex) and 5,250 (Nifty) levels were proving as strong support levels as the key indices despite repeated attempts refused to go below those levels. However, the local markets failed to match the optimism which was evident in most Asian markets as investors globally remained hopeful that the Chinese central bank, European Central Bank and the Bank of England would employ quantitative easing measures to boost economic growth. But, markets in Europe were exhibiting subdued trends with major equity indices in the region halting their three session gaining streak and trading with under half a percent cuts. On the domestic front, cues from the money market remained lackluster as Indian rupee halted the fourth session appreciating run and retreated to the 54.50 per dollar levels. Meanwhile, the HSBC services PMI survey, which indicated that India's services sector activity expanded in June for the eighth consecutive month although at a slower clip, did little to underpin sentiments. The report highlighted that though rise in new orders are likely to hold up service sector activity in coming months, however falling demand from India's traditional overseas trading partners like the United States and the European Union could dampen future growth prospects of Indian companies. On the BSE sectoral space, maximum profit booking was evident in the IT counter which plunged about a percent and remained top laggard in the space followed by the heavyweight Oil & Gas and defensive FMCG pockets which sank well over half a percent and capped the upside chances for the markets. On the other hand, the Metal sector shares staged a strong rally of close to two percent and remained the top gainer followed by the high beta Realty index which climbed closed to a percent.

Moreover, the broader markets continue to trade on a positive note with notable gains of over half a percent outperforming their larger peers by a fat margin. The bourses consolidated on weak volumes of over Rs 0.5 lakh crore while the market breadth on BSE was in favor of advances in the ratio of 1506:1047 while 127 scrips remained unchanged.

The BSE Sensex is currently trading at 17,403.60 down by 22.11 points or 0.13% after trading as high as 17,523.77 and as low as 17,398.89. There were 16 stocks advancing against 14 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index advanced 0.59% and Small cap index climbed 0.52%.

On the BSE sectoral space, Metal up 1.72%, Realty up 0.81%, Auto up 0.68%, Consumer Durables up 0.45% and Bankex up 0.34% were the only gainers, while IT down 0.94%, Oil & Gas down 0.86%, FMCG down 0.60%, TECk down 0.56% and Healthcare down 0.23% were the  major laggards in the space.

Jindal Steel up 3.68%, Sterlite up 2.71%, Maruti up 2.19%, Bajaj Auto up 1.41% and SBI up 1.33% were the major gainers on the Sensex, while ONGC down 2.25%, Wipro down 2.07%, Dr Reddy’s down 1.51%, HUL down 1.15% and Sun Pharma down 1% were the major losers in the index.

Meanwhile, service sector activity in India expanded in the month of June, but at a rate that was slightly lower than previous month levels. Nevertheless, the sector extended its growth momentum for the eighth consecutive month thanks largely to the strong output increase as order book volumes continued to expand. The service sector report has come after manufacturing activity survey released on July 2, 2012 showed that manufacturing sector business conditions improved at fastest rate in four months, highlighting the fact that the Indian private sector output registered strong growth in June, 2012.

According to the seasonally adjusted HSBC Business Activity Index, the service sector activity grew at a marginally slower pace of 54.3 in June, as against 54.7 in the previous month. A figure above 50 signals increase in production while, a number below 50 indicates contraction. Though the service sector growth in the month under review remained lower, however the purchasing managers' index (PMI) reading, which measures the overall health of the sector, suggested that strong domestic consumption helped order books fill at their strongest pace in four months.

Though rise in new orders are likely to hold up activity in coming months, however falling demand from India's traditional overseas trading partners like the United States and the European Union could dampen future growth prospects of Indian companies. Besides, employment in the service sector too rose in the month, marking a four-month sequence of expansion. Despite being below the long-run average for this series, the increase in payroll numbers was the strongest since June 2011, while the rate of job creation at manufacturers also accelerated.

But the rate of input cost inflation remained stagnant at elevated levels as it hardly budged from previous month levels. The output price inflation remained stubbornly above the long-run series average in the services sector as it has risen each month since November 2010. Meanwhile, service sector business expectations remained optimistic, although the level of optimism dipped to the lowest since March, sentiment was still above the long-run series average.

Thus, the strong Manufacturing and Service sector PMI have propelled the HSBC Composite Index, which covers both the manufacturing and service sectors, to 55.7 in June, higher from 55.3 seen in May 2012. However, the HSBC survey further indicated that looking at the recent economic indicators and current scenario of high inflationary pressure, there was no room for the Reserve Bank of India to employ further monetary easing measures. Indian central bank had left key interest rates unchanged in its recent monetary policy review meet on June 18 after slashing the repo and reverse rates by 50 basis points each in its previous policy review meet.

The S&P CNX Nifty is currently trading at 5,283.15, lower by 4.80 points or 0.09% after trading as high as 5,317.65 and as low as 5,279.95. There were 25 stocks advancing against 25 declines on the index.

The top gainers on the Nifty were Jindal Steel up 4.50%, Sterlite up 2.84%, Sesa Goa up 2.44%, Maruti up 2.16% and Ranbaxy up 1.57%.

ONGC down 2.74%, Wipro down 2.08%, Asian Paints down 1.71%, Dr Reddy’s down 1.68% and HCL Tech down 1.56% were the major losers on the index.

In the Asian space, Hang Seng rose 0.04%, Jakarta Composite climbed 0.72%, KLSE Composite advanced 0.29%, Nikkei 225 gained 0.41%, Straits Times Index ascended 0.41%, KOSPI Composite Index added 0.35% and Taiwan Weighted inched up 0.06%.

On the other hand Shanghai Composite eased 0.25%.

The European markets got off to a weak start as France’s CAC 40 shed 0.40%, Germany’s DAX dropped 0.31% and the United Kingdom’s FTSE 100 fell 0.30%.