Cautious Sensex inches slightly lower; snaps three session uptrend

After showing some signs of coming out of the consolidation mode in last session, stock markets in India failed to capitalize on the momentum and snapped yet another range bound session on a flat note. The last trading session of July’s first week was characterized of choppiness as the key indices gyrated in a tight range through the day. Investors lacked to conviction to open fresh positions amid a lot of uncertainties surrounding the domestic as well as global markets.

The psychological 5,300 (Nifty) and 17,500 (Sensex) levels proved as strong supports as the key gauges managed to settle above those levels by the end. The key gauges displayed listless performance through the day as the aimless benchmarks appeared exhausted and showed only sideways kind of movement in a tight band, lacking any significant upside triggers.

Besides, market participants globally also fretted over the fact that the policy makers too are concerned about the gloomier economic prospects after the ECB and People’s Bank of China cut their benchmark borrowing costs, while the Bank of England raised the size of its asset-purchase program.

On the domestic front, cues from the money market remained pessimistic as Indian rupee extended its depreciating run for the third consecutive session and drifted closer to the 55 levels against the US dollar.

Meanwhile, the upside for domestic markets was also capped after Planning Commission Deputy Chairman Montek Singh Ahluwalia stated that achieving average growth rate of 9 percent in the 12th Five Year Plan will not be possible given the deteriorating global economic situation over the last one year, however he felt that growth rate of 8-8.5 percent in five year period would be feasible.

But markets’ downside too was limited after a major global investment bank downplayed the possibility of India’s sovereign rating downgrade to the junk status given the recent revival in sentiment. On the BSE sectoral space, the high beta Realty sector sank by over a percent and remained the top laggard in the space followed by the Metal pocket, which too plummeted over a percent and restricted the markets from moving in to the green territory.

On the other hand, the defensive FMCG counter along with the rate sensitive Bankex index remained the only indices, which kept their heads above the water and supported the benchmark indices.

On the global front, cues from most Asian markets also remained somber however the benchmark in China bucked the pessimistic trend and surged over a percent led by property shares after the recent cut in interest rates by Chinese central bank raised expectations that lower financing costs would boost sales of houses.

The European markets too traded on a weak note as amid waning expectations of further monetary stimulus ahead of a key US jobs report. Concerns also grew over Spanish banks, which may need additional aid after the European Central Bank failed to signal new measures to support struggling countries.

Back home, the NSE’s 50-share broadly followed index Nifty, eased by ten points to settle above the psychological 5,300 support level while Bombay Stock Exchange’s Sensitive Index - Sensex slipped by one tenth of a percent to finish above the crucial 17,500 mark. Moreover, after many days of sharp upmove, the broader markets showed some weakness as investors took to profit booking in Mid Cap stocks, which fell by over half a percent and underperformed their larger peers.

The markets rose on good overall volumes of over Rs 1.21 lakh crore while the turnover for NSE F&O segment remained on the higher side as compared to that on Thursday at over Rs 0.82 lakh crore. The market breadth remained in favor of declines as there were 1,361 shares on the gaining side against 1,532 shares on the losing side while 135 shares remained unchanged.

The BSE Sensex eased 17.55 points or 0.10% to settle at 17,521.12, while the S&P CNX Nifty fell by 10.35 points or 0.19% to close at 5,316.95.

The BSE Sensex touched a high and a low of 17,554.55 and 17,425.47 respectively. The BSE Mid cap index was down by 0.56% and Small cap index down by 0.21%.

ICICI Bank up 1.55%, HDFC up 1.27%, M&M up 1.16%, HUL up 1.15% and Cipla up 1.08% were the major gainers on the Sensex, while Jindal Steel down 3.17%, Sterlite Industries down 2%, Tata Power down 1.99%, Maruti down 1.93% and Hero Moto down 1.74% were top losers on the index.

The top gainers on the BSE sectoral space were FMCG up 0.67% and Bankex up 0.18%, while Realty down 1.20%, Metal down 1.09%, Consumer Durables down 1.08%, Capital Goods down 1.03% and Power down 0.83% were top losers on the BSE sectoral space. 

Meanwhile, at a time when Asia’s third largest Indian economy is showing signs of deterioration owing to a series of domestic challenges along with weakening international scenario, a recent report from United Nations underscoring global companies perceive India as third most attractive destination for investment after China and the United States, emerged as silver lining amid dark clouds. The report also highlighted that FDI inflows to South Asia turned around as a result of higher inflows to India, the dominant foreign direct investment (FDI) recipient in the region.

According to the World Investment Report 2012 prepared by United Nations Conference on Trade and Development (UNCTAD), a survey of 179 top global firms around the world showed that the companies unanimously saw India only behind China and the United States in their list of top destinations where they planned to invest between 2012 and 2014. However, the survey also highlighted that the transnational companies expected slower FDI growth at the global level in 2012.

India, the largest FDI recipient in South Asia accounting for more than four fifths of total FDI inflows to the region, showed a strong performance as FDI inflows in the country reached $31.6 billion in 2011, surging around 33 percent from previous years’ $24.2 billion levels. Assuming that the present trend of FDI inflow in India continues, the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) chief economist Nagesh Kumar has predicted that the nation is likely to witness 20-25 percent growth in FDI inflows this year while that in the subsequent year would be about 20 percent.

Following declines in 2009 and 2010, FDI inflows to South Asia rose by 23 percent to $39 billion in 2011, of which India accounted for around $32 billion inflows followed by the Islamic Republic of Iran and Pakistan, the second and third largest FDI recipients, amounted to $4.2 billion and $1.3 billion, respectively. Bangladesh also emerged as a major recipient, with FDI inflows increasing to a record high of $1.1 billion.

After three years’ decline, outbound FDI from the South Asian region recovered as well. In 2011, FDI outflows from South Asia rose by 12 percent to $15.2 billion. Outflows from India, the region’s dominant source of FDI, increased to $14.8 billion. The report also pointed that India remained the largest investor in least developed countries (LDCs) from developing and transition economies, followed by China and South Africa.

The S&P CNX Nifty touched a high and low 5,327.20 and 5,287.75 respectively.

The top gainers on the Nifty were ICICI Bank up 1.65%, M&M up 1.41%, HUL up 1.17%, HDFC up 1.08% and Cipla up 1.05%. On the flipside, Jindal Steel down 3.45%, Sesa Goa down 2.03%, Maruti down 1.97%, Asian Paints down 1.89% and Sterlite Industries down 1.73% were the top losers on the index.

The European markets were trading in red, as France's CAC 40 down 0.45%, Germany's DAX eased 0.23% and United Kingdom’s FTSE 100 down 0.01%.

Asian stocks fell on Friday in spite of policy easing by Bank of England, European Central Bank and The People's Bank of China as they fell to assure investors that the global economy is out of the tempest. In spite of various policy announcement made by the major central banks it had a largely muted effect on investor’s sentiment. On Thursday European Central bank slashed euro zone borrowing cost by 0.25%. Earlier in the day Bank of England decided to keep its interest rate to as low as 0.50% but it emphasized on quantitative easing as it decided to purchase bonds from secondary market worth of 50 billion pounds to boost recession effected economy.

Shanghai Composite rose to its highest level in a week on Friday as Industrial Companies and developers profited from the rate cut made by The People's Bank of China offsetting losses incurred by the banks.  Hang Seng Index was down throughout the day as country’s financial services sector hammered losses due to rate cut by the Chinese Central Bank. While Nikkei’s average fell as investors were unsatisfied after monetary easing by the Central bank of China, Europe and England to revive the economic growth.