Indian bourses witness consolidation after three sessions' rally

Indian benchmark equity indices, after vehemently surging over three and half a percent in the previous three sessions, went for consolidation on Wednesday’s trade by settling just above the pre-close level. It turned out to be a range-bound session for the frontline indices, which somehow managed to cling on to the levels reached on Tuesday as investors at large chose to play the waiting game ahead of a series of developments from global front, which will pave the way forward for the local bourses. All eyes would be on the outcome of the US Fed meeting that would conclude today as well as on the ECB meeting scheduled tomorrow i.e. August 2.

On the domestic front, the market-men remained hopeful for some form of action in terms of reforms or diesel price hike after the Cabinet reshuffle. P Chidambaram has been appointed as the new Finance Minister. He took over the portfolio from Prime Minister Manmohan Singh who had been holding temporary charge after Pranab Mukherjee while, Sushil Kumar Shinde will now be the new Home Minister and Veerappa Moily will hold additional charge of power.

Positive opening in European counters too provided some support to domestic bourses. Improved stability in the European markets amid speculation that the central banks would be taking further steps to support the economic recovery in the Euro Zone while, Asian equity indices end mixed ahead of outcome of Federal Reserve’s meeting and European Central Bank's meet that will begin on August 2.

Back home, on the sectoral front, healthcare pack remained the top gainer led by Cipla, up by 4.50% which reported better than expected Q1 numbers. The company reported a surge of 58.19% in its net profit at Rs 400.76 crore for the quarter, while its total income increased by 23.85% to Rs 2011.25 crore. Cipla’s strong Q1 results sparked rally in some other pharma stocks. Sun Pharmaceuticals Industries and Wockhardt hit record highs. On the flip side, Metal space lost about 0.70% following fall in base-metals prices on the London Metal Exchange.

Nevertheless, the gains remained capped after the HSBC purchasing managers’ index (PMI), a headline index designed to measure the overall health of the manufacturing sector, expanded at the slowest pace in the past eight months to 52.9 in July, 2012 as against 55.0 in the previous month of 2012. However, a figure above 50 signals increase in production while, a number below 50 indicates contraction.

Meanwhile, the sentiments also got dampen after India’s exports fell 5.45 percent to $25.1 billion in June, while imports fell 13.46 percent to $35.4 billion, leaving a trade deficit of $10.3 billion, government data showed on Wednesday. After recording strong growth for much of last year, India’s overseas sales have tanked on the back of weak demand in the United States and Europe. The gains remained capped up to some extent as shares of three public sector oil marketing companies edged lower in the trade after under-recoveries on diesel and PDS kerosene rose effective August 1, 2012. PSU OMCs suffered under-recovery of Rs 138,541 crore for the year ended March 31, 2012, which was sharply higher than under-recovery of Rs 78,190 crore in the year ago period. Their under-recovery was Rs 47,811 crore during April-June 2012 period.

The NSE’s 50-share broadly followed index Nifty, surged by just 11 points to settle well above its psychological 5,200 support level moreover, Bombay Stock Exchange’s Sensitive Index -Sensex- added over twenty points to finish well above the psychological 17,250 mark. Moreover, the broader indices outperformed benchmarks and ended the session with a gain of about a percentage point. The market breadth was evenly divided, as there were 1,689 shares on the gaining side against 1,128 shares on the losing side while 135 shares remained unchanged.

The BSE Sensex gained 21.20 points or 0.12% to settle at 17,257.38, while the S&P CNX Nifty rose by 11.50 points or 0.22% to close at 5,240.50.

The BSE Sensex touched a high and a low of 17,291.99 and 17,189.16 respectively. The BSE Mid cap and Small cap index ended up by 0.95% and 1.12% respectively.

Cipla up 4.40%, BHEL up 2.13%, Tata Power up 1.63%, SBI up 1.37% and HDFC up 1.28% were top gainers on the Sensex, while Coal India down 2.73%, ONGC down 1.94%, Hero MotoCorp down 1.71%, TCS down 1.05% and Tata Steel down 1.03% were top losers on the index.

The top gainers on the BSE sectoral space were, Health Care (HC) up 1.32%, Capital Goods (CG) up 1.07%, Realty up 0.88%, Power up 0.87% and FMCG up 0.42%, while Metal down 0.69%, Oil & Gas down 0.35%, IT down 0.34%, TECk down 0.33% and PSU down 0.19% were top losers on the BSE sectoral space. 

Meanwhile, with clear signs that weak global economic conditions were dragging down export orders, manufacturing activity grew at a slower clip in July on the back of power outages and a moderation in new order inflows, which continued to rise but at the weakest rate since last November as new export orders fell for the first time since October 2011. Dollar appreciation could be mentioned as a driver behind falling export business. But the impact of unusual severe blackouts of the last two days of July, which hit grids in a dozen northern states, home to around 670 million people, was not included in the survey.

According to the HSBC purchasing managers’ index (PMI), a headline index designed to measure the overall health of the manufacturing sector, expanded at the slowest pace in the past eight months to 52.9 in July, 2012 as against 55.0 in the previous month of 2012. However, a figure above 50 signals increase in production while, a number below 50 indicates contraction.

Underscoring the global effect of the current downturn caused by the euro zone's 2-1/2 year old sovereign debt crisis, the new export orders sub-index fell to 49.7 from 52.3 in June, its first sub-50 reading in nine months. Further, manufacturing firms in India signaled rising charges during July. Although the output price inflation persisted in the sector for 35 successive months, but the rate of increase during July slowed from the reading in the previous month. Meanwhile, quantity of purchases in the Indian manufacturing sector increased moderately, with the pace of increase being the slowest since September 2011.

Since, manufacturing accounts for around 15 percent of India's gross domestic product, so a slowdown would not augur well for Asia's third-largest economy, already struggling with its weakest growth in almost a decade. Further, reasoning deficient monsoon, deceleration of industrial growth, RBI, in its first quarter monetary policy review 2012-13, revised downward the GDP forecast for the current financial year to 6.5 per cent from 7.3 per cent.

The S&P CNX Nifty touched a high and low 5,246.35 and 5,212.65 respectively.

The top gainers on the Nifty were Cipla up 4.46%, Kotak Bank up 3.71%, Ambuja Cement up 3.19%, JP Associates up 3.07% and Reliance Infra up by 2.49%. On the flipside, Coal India down 2.59%, ONGC down 2.32%, Sesa Goa down 2.13%, Hero MotoCorp down 1.88% and TCS down 1.58% were top losers on the index. 

The European markets were trading mixed, France's CAC 40 was up 0.33%, Germany's DAX was down 0.01% and United Kingdom’s FTSE 100 was up 0.79%.

Tracking slowdown in manufacturing activity in various countries, Asian stock markets ended mixed on Wednesday ahead of monetary policy decisions in the US and Europe. However South Korea's new export orders in July were slightly better than in June, but hardly heartening, while Taiwan's fell at their fastest pace since December. Meanwhile, Chinese stocks advanced as an official at the China Securities Regulatory Commission was quoted saying that investors may have overestimated the economic slowdown in the country.