Benchmarks turn negative on easing manufacturing PMI data

Key Indian equity indices turned negative in late afternoon session, with the Sensex losing more than 100 points, despite firm opening of European markets. Domestic sentiments got hit as business activity in Indian manufacturing sector eased further in August 2018, for a second straight month amid slower gains in output and new orders.  As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance -fell to 51.7 in August from 52.3 in July. The street also got cautious after  former finance minister P Chidambaram expressed scepticism over India's GDP growth prospects, saying it would ‘not be so favourable’ in third and fourth quarters, despite the GDP growing at 8.2% in the current fiscal's first quarter. He said the country's growth rate might decline in the third and fourth quarters and be the same as that reported in the last fiscal.

Anxiety also spread among traders, with the Finance Ministry reporting that GST collections dropped to Rs 93,960 crore in August from Rs 96,483 crore in the previous month. Traders also took note of PHD Chamber of Commerce and Industry vice president D K Aggarwal’s statement that international market volatility, increasing trade protectionism, depreciating international currencies including weakness of Chinese Yuan and rise in crude oil prices have put pressure on Indian rupee in the recent times. However, the broader markets were trading contradictory to the larger peers, while Consumer Durables index gained most among all other sectoral indices with the gains of more than a percent.

On the global front, European markets were trading in green, after Eurozone inflation moderated in August from a more than five-year high level. The flash data from Eurostat revealed that inflation eased to 2 percent from 2.1 percent in July. The annual rate was expected to remain at 2.1 percent, which was the highest since December 2012. However, Asian markets were trading in red, as China's manufacturing activity growth slowed to a 14-month low in August on weaker new orders. The Caixin Purchasing Managers' Index fell to 50.6 in August from 50.8 in July.

The BSE Sensex is currently trading at 38522.09, down by 122.98 points or 0.32% after trading in a range of 38518.39 and 38934.35. There were 15 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.18%, while Small cap index was up by 0.37%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 1.06%, Telecom up by 1.00%, Healthcare up by 0.97%, Metal up by 0.71% and Basic Materials up by 0.44%, while FMCG down by 1.18%, Bankex down by 0.67%, Utilities down by 0.62%, Realty down by 0.60% and Power down by 0.58% were the top losing indices on BSE.

The top gainers on the Sensex were Wipro up by 3.40%, Sun Pharma up by 2.05%, Tata Motors - DVR up by 1.23%, Adani Ports & SEZ up by 1.17% and Bajaj Auto up by 0.97%. On the flip side, Hindustan Unilever down by 2.90%, Power Grid Corporation down by 2.49%, Axis Bank down by 1.86%, ICICI Bank down by 1.46% and Maruti Suzuki down by 1.45% were the top losers.

Meanwhile, amid slower gains in output and new orders, business activity in Indian manufacturing sector eased further in August 2018, for a second straight month.  As per the survey report, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) - a composite single-figure indicator of manufacturing performance -fell to 51.7 in August from 52.3 in July. Nevertheless, despite a slight deceleration, the manufacturing sector activity expanded for the thirteenth consecutive month as the PMI reading stood above the watershed 50 mark, which differentiates growth from contraction.

The report further highlighted that despite softening in August month, the output and new orders continued to extend the current period of expansion for thirteenth and twelfth month, respectively, on the back of strong underlying demand. Besides, orders from abroad rose for the tenth consecutive month during August and the rate of expansion was marked and accelerated to the strongest since February. However, job creation remained marginal and broadly similar to the previous survey period, even though firms were encouraged to raise their staffing levels during reported month.

On the inflation front, the manufacturing companies continued to face higher input costs during August, due to higher raw material costs with the weakening currency.  Although sharp, input cost inflation moderated to the weakest since May. The report further found that the firms raised their selling prices for the thirteenth consecutive month in August, in order to protect margins. Meanwhile, business optimism towards the 12- month outlook for output softened from July’s three month high.

The CNX Nifty is currently trading at 11642.20, down by 38.30 points or 0.33% after trading in a range of 11640.15 and 11751.80. There were 26 stocks advancing against 23 stocks declining, while 1 index remained unchanged on the index.

The top gainers on Nifty were Dr. Reddy’s Lab up by 4.92%, Wipro up by 3.20%, Eicher Motors up by 3.10%, Titan up by 2.87% and HPCL up by 2.38%. On the flip side, Bajaj Finance down by 3.53%, Hindustan Unilever down by 3.17%, Power Grid Corporation down by 3.03%, Tech Mahindra down by 2.08% and Axis Bank down by 1.89% were the top losers.

All Asian markets were trading in red; Taiwan Weighted lost 99.72 points or 0.91% to 10,964.22, Jakarta Composite plunged 61.97 points or 1.04% to 5,956.49, Hang Seng fell 176.01 points or 0.64% to 27,712.54, Straits Times decreased 7.67 points or 0.24% to 3,205.81, Shanghai Composite lost 4.51 points or 0.17% to 2,720.74, Nikkei 225 declined 157.77 points or 0.69% to 22,707.38 and KOSPI was down by 15.85 points or 0.69% to 2,307.03.
 
 European markets were trading mostly in green; UK’s FTSE 100 increased 55.36 points or 0.74% to 7,487.78 and France’s CAC was up by 1.10 points or 0.02% to 5,407.95. On the flip side, Germany’s DAX was down by 28.23 points or 0.23% to 12,335.83.