Post Session: Quick Review

Optimism remained unscathed on Wednesday in face of sluggish macro-economic data, which underscored ailing health of the economy. Benchmark equity indices putting-up resilient face, gained ground, ending near day’s high. Although, profit-booking was witnessed for couple of times during the session, benchmarks pulled back to clock fourth successive session of gains, indicating that the new found strength of the bourses was here to stay. Meanwhile, on the macro-front, in a rude shock, India's main inflation gauge, based on monthly WPI, 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 month of June. In a knee-jerk reaction to this bad news, benchmarks dipped to intraday low, but soon recovered and ended near day’s high point. Sensex and Nifty, clinching gains of over half a percent, ended near the psychological 19350 and 5750 levels respectively.

On the global front, most of Asian pacific markets settled on a positive note for a fifth day, on course for the longest streak of gains in six weeks, amid low trading volumes after trading in Hong Kong was canceled due to a typhoon. Meanwhile, European shares were off sessions low in early trading after euro zone growth data managed to beat expectations, nevertheless gains were kept in check by U.K. stocks which reacted negatively to the release of the latest Bank of England (BoE) minutes.

Closer home, the rally at Dalal Street was mainly aided by stocks from Auto, Metal and Consumer Durables. Oil & Gas space too witnessed robust buying post Oil Minister Veerappa Moily said that one-time big price hike for diesel may be on cards to bridge the gap of under-recoveries. Ruling out the option of hiking the kerosene and LPG prices, Moily said, “Government will consider a request from oil marketing companies to be allowed to raise diesel prices by more than the approved 50 paise a month, to bridge the losses”. Additionally, investors also took heart from the reports, which suggested of government unveiling a plan to tax imports of non-essential items, to curb the widening current account deficit.

However, disappointment crept in from stocks belonging to the Capital Goods, IT and Technology and Health Care counters, which were the major losers for the session. Nevertheless, the session ended in fine contour, with the market breadth ending positive on the BSE; advances and declining stocks were in a ratio of 1299: 1043, while 157 scrips remained unchanged. (Provisional)

The BSE Sensex gained 144.80 points or 0.74% to settle at 19374.64.The index touched a high and a low of 19392.56 and 19203.63 respectively.  The BSE Mid cap and Small cap indices ended higher by 0.67% and 0.37% respectively. (Provisional)

On the BSE Sectoral front, Auto up by 3.29%, Oil & Gas up by 3.05%, Consumer Durables up by 2.91%, Metal up by 2.69% and PSU up by 2.25% were the top gainers, while Capital Goods down by 0.97%, IT down by 0.33%, Health Caredown by 0.12% and Teck down by 0.06% were the only losers in the space. (Provisional)Out of the 30 stocks on the Sensex, 17 settled higher, while 12 stocks settled lower and one stock remains unchanged.

The top gainers on the Sensex were Tata Motors up by 9.41%, Hindalco Industries up by 7.11%, ONGC up by 5.11%, Gail India up by 3.89% and Tata Steel up by 3.36%. On the flip side,  Dr Reddys Lab down by 2.17%, BHEL down by 1.74%, Wipro was down by 1.39%, Bharti Airtel was down by 1.27% and HDFC was down by 1.09% were the top losers on the Sensex. (Provisional)

Meanwhile, in a rude shock, India's main inflation gauge, based on monthly WPI, 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. Build up inflation rate in the financial year so far was at 3.12% compared to a build up rate of 2.98% in the corresponding period of the previous year. However, May inflation figures were revised downwards to 4.58% from 4.70% earlier.

Surge in ‘Food Articles’ group by 3.4% to 237.7 (Provisional) from 229.8 (Provisional) for the previous month, which lifted the index of Primary Articles, having weight of 20.12%, by 2.7% to 238.8 (Provisional) from 232.5 (Provisional) on (M-o-M) basis, mainly turned out to be the main culprit behind the acceleration of July inflation number. Food Articles index rose mainly due to higher price of fruits and vegetables (11%), rice (5%), fish-inland (5%) and fish-marine, barley, urad, condiments and spices, mutton, wheat and masur (1% each). Meanwhile, the index for ‘Non-Food Articles’ group rose by 0.9% to 210.7 (Provisional) from 208.8 (Provisional) for the previous month.

Additionally, Manufactured products, which carry weight of 64.97% in the index, rose by 0.6% to 150.2 (Provisional) from 149.3 (Provisional) for the previous month. The index for 'Food Products' group rose by 0.7% to 168.9 (Provisional) from 167.7 (Provisional) for the previous month.

Further, the index of Fuel & Power, which has weight of 14.91%, rose by 3% to 199.8 (Provisional) from 194.0 (Provisional) for the previous month due to higher price of furnace oil, aviation turbine fuel, petrol and bitumen (7% each) and high speed diesel (3%). 

July inflation also prolonged previous sessions’ gaining trend on account of falling currency, which pushed up the price of imports, making raw materials more costly. Thus, with this another set of gloomy data, the central bank's task of containing inflation will likely get more difficult, since raising interest rates will adversely affect an already slowing economy. Earlier, India's annual industrial output growth measured by index of industrial production (IIP), despite several measures taken by the government including imports curb and export sops, contracted for second straight month at 2.2% at 164.3 in June, way below the general expectation of a contraction of 1.3% and 1.6% figure of last month.

India VIX, a gauge for markets short term expectation of marginally lost 2.90% at 18.70 from its previous close of 19.26 on Tuesday. (Provisional)

The CNX Nifty gained 50.45 points or 0.89% to settle at 5,749.75. The index touched high and low of 5,754.55 and 5,690.20 respectively. Out of the 50 stocks on the Nifty, 30 ended in the green, while 20 ended in the red.

The major gainers were Tata Motors up 9.82%, Hindalco Industries up by 7.22%, BPCL up by 6.50%, NMDC up by 5.83% and DLF up by 5.65%. The key losers were HCL Tech down by 2.19%, Ranbaxy  down by 1.82%, BHEL down by 1.74%, Dr. Reddy's Laboratories down by 1.35% and Reliance Infrastructure down by 1.27%.(Provisional)

The European markets were trading in green with, France’s CAC 40 up by 0.39%, Germany’s DAX up by 0.21% and the United Kingdom’s FTSE 100 up by 0.07%.

Most of the Asian markets concluded Wednesday’s trade in green. Japan’s Nikkei share average closed at a one-week high after the dollar clawed back ground against the yen but stocks fell in much of Asia after US sales data reinforced expectations that the Federal Reserve will soon pare its stimulus. South Korea shares ended at their highest level in more than two months amid continued bargain hunting by foreign investors for large-cap technology and automobile shares. Foreign investors were net buyers of 360.0 billion won ($322.80 million) worth of stocks, the most since June 28. Hong Kong Exchanges trading was cancelled due to Issuance of Typhoon Signal No. 8.

China’s financial institutions attracted the least foreign equity investment in more than a year in the second quarter amid a slower inflow of foreign capital. The institutions, including banks, brokerages and insurers, attracted a total of $442 million in such investment from April to June, nearly a fourth of the first quarter’s total and the lowest since authorities started compiling the data last year.

Indonesia’s central bank is likely to keep its main interest rate on hold at Thursday’s monthly meeting but some doubt it will be able to avoid another hike in coming months to battle high inflation and help a sliding currency. Since June, the central bank has raised both the benchmark rate and the overnight deposit facility rate, or FASBI, by a total of 75 basis points each to combat inflation expectations from a big fuel price hike and support the rupiah. Indonesia will release its latest balance of payments data on Friday.