Firm trade prevails; Auto, Consumer Durables lead

Indian equity markets added gains to continue firm trade in the late afternoon session on account of buying in front line counters. Caution prevailed on the street on account of WPI, India’s main inflation gauge, which shot higher to 5.79% (Provisional) for the month of July, way above the Reserve Bank of India’s (RBI) perceived comfort level of 5% and against 4.86% (Provisional) for the previous month of June. Traders were seen piling positions in Auto, Consumer Durables and Oil & Gas stocks while selling was witnessed in Capital Goods, IT and FMCG sector stocks. In scrip specific development, Tata Steel was trading firm after the company reported better-than-expected results, with its consolidated net profit surging 90.51% during the April-June quarter. Oil marketing companies like BPCL and IOC were trading in green after Oil Minister Veerappa Moily stated that a one-time diesel price hike to bridge under recoveries is under consideration. Financial Technologies tumbled after brokers and investors raised doubts over the company’s promoted commodity exchange - National Spot Exchange’s (NSEL) ability to quickly pay them after suspension of trade.

On the global front, most of the Asian markets were trading in green while the European markets were too trading on mixed note. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 5,700 and 19,300 levels respectively. The market breadth on BSE was positive in the ratio of 1152:1010, while 157 scrips remain unchanged. 

The BSE Sensex is currently trading at 19319.01, up by 89.17 points or 0.46% after trading in a range of 19338.88 and 19203.63. There were 15 stocks advancing against 14 declines while 1 stock remained unchanged on the index.

The broader indices were trading in green; the BSE Mid cap and Small cap index were trading up by 0.48% and 0.25% respectively.

The top gaining sectoral indices on the BSE were, Auto up by 2.87%, Consumer Durables (CD) up by 2.47% Oil & Gas up by 2.31%, Metal up by 2.24% and PSU up by 1.73%. While, Capital Goods down by 0.73%, Information Technology (IT) down by 0.42%, Fast Moving Consumer Goods (FMCG) down by 0.34% and TECK down by 0.31% were the only loser indices on the BSE.

The top gainers on the Sensex were Tata Motors up by 7.90%, Hindalco Industries up by 4.70%, ONGC up by 4.20%, Gail India up by 3.64% and Tata Steel up by 3.36%. On the flip side, BHEL down by 2.56%, Wipro down by 1.83%, Hindustan Unilever down by 1.17%, Bharti Airtel down by 1.13% and Dr. Reddy‘s Lab down by 0.80% were the top losers on the Sensex.

Meanwhile, the Reserve bank of India (RBI) governor, D Subbarao amid the growing talks of consolidating small state-run banks to create one or two globally small state-run banks has cautioned against making a ‘too-large-to-fail’ bank. Mentioning the 2008 financial credit crisis which was triggered by too-big-to-fail banks, the governor said ‘we don’t need monopolies, instead we need four-five banks of big size, as large banks can become too-big-to-fail, leading to moral hazard problems with adverse impact on financial stability’.

Subbarao said that significantly big banks can resort to monopolistic practices resulting into unequal competition in the market, rising regulatory issues and can also blunt the monetary transmission and market mechanism for efficient allocation of resources.

Subbarao noted that bank consolidation assumed significance after the introduction of financial sector reforms beginning early nineties. By adding further RBI governor said that consolidation will bring in higher capital base facilitating increased lending activity and faster GDP growth, apart from boosting infra financing and meet demands of corporates both at home and globally.

However, supporting small banks, he said that they will have a comparative advantage in the supply of credit to small businesses and can effectively cater to unbanked areas and can also become more efficient in financial inclusion. Without consolidation, it will take several years for the country's banks to achieve the status of a large global bank, he added.

The CNX Nifty is currently trading at 5,729.85, up by 30.55 points or 0.54% after trading in a range of 5,735.85 and 5,690.20. There were 29 stocks advancing against 21 declines on the index.

The top gainers of the Nifty were Tata Motors up by 8.27%, Hindalco Industries up by 4.76%, DLF up by 4.75%, NMDC up by 4.64% and ONGC up by 4.33%. On the flip side, BHEL down by 2.85%, HCL Technologies down by 1.74%, Reliance Infrastructure down by 1.60%, Asian Paints down by 1.48% and Jindal Steel down by 1.30% were the major losers on the index.

Most of the Asian equity indices were trading in green; Straits Times rose by 0.13%, Jakarta Composite advanced by 0.63%, Seoul Composite added 0.57% and Nikkei 225 surged 1.32%.

On the other hand, Taiwan weighted down by 0.44%, KLSE Composite down by 0.15% and Shanghai Composite declined by 0.29%. Hong Kong Exchanges trading have been cancelled due to Issuance of Typhoon Signal No. 8.

The European markets were trading mostly in red; France’s CAC 40 was up 0.13%, Germany’s DAX lost 0.04% and the United Kingdom’s FTSE 100 edged lower 0.40%.