Equity markets recuperate from intra-day’s low; positive European markets opening aids

Equity markets in India have recuperated from intra-day’s low as investor’s digesting slew of negative reports, gained some sense of courage from the positive opening of European counterparts. Earlier, reports of policy inaction from European Central Bank along with the official confirmation of draught like situation from the India Meteorological Department spooked the sentiment. However, slender support, which emerged for the bourses at lower levels, as investor’s clinched away select blue chips stocks available at attractive valuations, also led to some recovery. Meanwhile, health care stocks continuing to showcase resilience, pruned some losses at Dalal Street. However, stocks from Metal, Capital Goods and realty counters, continued to languish at the bottom. 30 share barometer index, Sensex, on BSE, despite trading with a cut of close to a percent, was trading above the 17050 mark, similarly the widely followed index, Nifty, declining close to 50 points, was trading above the 5150 psychological level. The broader indices, too pared some of its losses, in sync with the frontline indices.

On the global front, taking by its stride ECB’s policy inaction, European markets have got off to an optimistic start, as investor’s shift their focus to US nonfarm pay rolls data, later in the day. Markets across the global suffered a major setback after the European Central Bank disappointed markets by not immediately reviving bond buying to lower crippling borrowing costs for Spain and Italy.

The BSE Sensex is currently trading at 17,061.73, down by 162.63 points or 0.94% after touching a high and low of 17,164.48 and 17,026.97 respectively. There were just 6 stocks advancing against 24 declines on the index. The overall market breadth on BSE was in the favour of declines which outdid advances in the ratio of 1502:972, while 122 shares remained unchanged.

The broader indices too pared some losses; the BSE Mid cap index was down by 0.60%, while Small cap index has lost 0.56%.

The lone gainer on the BSE sectoral space was HC up by 0.55%, while Metal down by 2.55%, CG down by 1.86%, Realty down by 1.68%, Auto down by 1.50% and Bankex down by 1.29% were top losers on the BSE sectoral space.

Dr Reddy’s up by 1.59%, NTPC up by 1.04%, Cipla up by 1.02%, Wipro up by 0.78% and Gail India up by 0.18% were major gainers on the Sensex, while Sterlite Industries down by 2.96%, Tata Steel down by 2.86%, Coal India down by 2.77%, Hindalco down by 2.48% and Tata Motors down by 2.42% were the major losers in the index.

Meanwhile, service sector activity in India expanded in the month of July, but at a rate that was slightly lower than previous month levels. Though the sector extended its growth momentum for the ninth straight month, but grew at a steady place in July, with growth in new orders and employment holding up. The survey showed order books grew at the same clip as in June, prompting businesses to increase their workforces at a similar pace as in the previous month.

According to the seasonally adjusted HSBC Business Activity Index, the service sector activity dipped to 54.2 in July, as against 54.3 in the previous month. A figure above 50 signals increase in production while, a number below 50 indicates contraction. Besides, the lower growth in service sector in the month under review, the purchasing managers' index (PMI) reading, which measures the overall health of manufacturing sector, though increased at a marked pace, but the slowest since November 2011.

New orders at private sector companies in India rose steeply in July. However, the pace of increase slowed from that recorded in June, with the new orders Index plunging to the lowest since November 2011. Meanwhile, job creation was recorded at manufacturers and service providers during July. The pace of job creation increase was broadly similar across both sectors, resulting in a slight rise in workforces at Indian private sector firms.

Extending the current inflationary period to 40 months, the composite data posted a further increase in input costs, as the input prices rose sharply at manufacturers in India and at a faster pace than the rise recorded at service providers. But the rate of input cost inflation was at the slowest in 21 months, i.e. since October 2010. Meanwhile, service sector business expectations remained optimistic, although the level of optimism dipped to the lowest since March.

Thus, the subdued Manufacturing and Service sector PMI have dragged the HSBC Composite Index, which covers the manufacturing and service sectors, to 54.4 in July from 55.7 seen in June 2012, the lowest expansion pace past April 2012. However, the HSBC survey further indicated that though the inflation readings eased, but remain firm on the back of rising wage costs and solid demand. Thus, with inflation risks still lingering despite the slowdown and policy action out of Delhi so far insufficient, the RBI has little room to manoeuvre. Indian central bank although left key interest rates unchanged in its recent monetary policy review meet on July 31, but did slashed the Statutory Liquidity Ratio (SLR) of scheduled commercial banks from 24% to 23% of their NDTL with effect from the fortnight beginning August 11, 2012.

The S&P CNX Nifty is currently trading at 5180.25, down by 47.50 points or 0.91% after touching a high and low of 5,204.35 and 5,164.65 respectively. There were 10 stocks advancing against 39 declines, while one stock remained unchanged on the index.

The major gainers on the Nifty were Ranbaxy up by 2.16%, Dr Reddy up by 1.52%, Cipla up by 1.16%, NTPC up by 0.92% and Asian Paints up by 0.76%. While, JP Associates down by 3.40%, Sterlite Industries down by 3.01%, Tata Steel down by 2.83%, Coal India down by 2.71% and Jindal Steel down by 2.52% were the major losers on the index.

Asian indices were trading mostly in red; Hang Seng was down by 0.74%, Jakarta Composite down by 0.60%, Nikkei 225 plunged by 1.13%, KLSE Composite slid 0.12%, Kospi Composite Index plummeted by 1.11% and Taiwan Weighted lost 0.69%. On the other hand, Shanghai Composite and Straits Times were up by 0.24% and 0.07% respectively.

European markets got off to an optimistic start; CAC 40 gained 1.03%, DAX climbed 0.82% and FTSE100 rose 0.47%.