Markets give up all the gains as Services PMI slips to over 4 year low

The Indian markets have given up all their gains after getting a dismal Services PMI data and as the rupee weakened against the dollar on fresh demand from importers. The major indices that were showing strength since morning have suddenly lost all their gains in a knee-jerk reaction to the HSBC Services Purchasing Managers’ Index (PMI) report, which stated that Indian services activities in September dropped to its lowest in over four years, coming at 44.6 in September from 47.6 in August. It showed firms were less optimistic about the future and were cutting staff as new business dries up. Though, there was concern related to the prolonging US government shutdown but the indices got a reason and changed their track, with traders booking profit at higher levels. The broader indices too have lost their momentum and have turned flat. On the sectoral front Auto and Consumer Durables continue to trade higher after the government said public sector lenders will offer cheaper loans to stimulate demand for struggling sectors.While the IT and technology stocks too are maintaining their upmove with the weakness in rupee. However, Capital Goods, Power and Metal are languishing in red with loss of over half a percent.

The market breadth though still remains in the favour of advances with 904 stocks advancing against 778 declining ones.

The BSE Sensex is currently trading at 19884.65, down by 17.42 points or 0.09% after trading in a range of 20034.76 and 19833.17. There were 11 stocks advancing against 17 declines on the index. The broader indices were trading flat; the BSE Mid cap index was up by 0.28 points and Small cap index gained 0.28%.

The top gaining sectoral indices on the BSE were, Auto up by 1.68%, Consumer Durables 0.80%, IT up by 0.62%, TECk up by 0.53% and Realty up by 0.49%, while Capital Goods down by 0.75%, Power down by 0.69%, Metal down by 0.59%, Bankex down by 0.56% and FMCG down by 0.43% were the losing indices.

The top gainers on the Sensex were Tata Motors up by 4.23%, TCS up by 1.59%, Bharti Airtel up by 1.40%, Cipla up by 1.15% and M&M up by 0.94%. On the flip side, Tata Power down by 1.91%, Sesa Goa down by 1.62%, Gail India down by 1.53%, Jindal Steel down by 1.43% and ICICI Bank down by 1.34% were the top losers on the Sensex.

Meanwhile, in order to boost demand in key sectors in the festival session and to bring relief to the consumers, especially the middle class, public sector banks will provide cheaper loans for auto and consumer goods purchases. The government has agreed to provide additional funds to the PSU banks to enable them financing of products from select sectors such as two-wheelers and consumer durables. The government is of the view that this selective stimulus will give a boost to capacity addition, employment and production, helping spur growth that fell to a four-year low of 4.4% in April-June quarter of current fiscal.

The decision to increase the quantum of capital infusion to PSU banks was taken at a meeting between Finance Minister P Chidambaram, Economic Affairs Secretary Arvind Mayaram, and RBI Governor Raghuram Rajan. Lower interest rates will depend on the lending capacity of banks, therefore, the government will enhance capital support to banks from the budgeted Rs 14,000 crore to help them lower interest rates on select category of goods identified. However, the government did not disclose the quantum of additional capital infusion.

At present, the demand in two key sectors such as Auto and consumer durables are worst hit due to the prevailing economic slowdown. The output of the consumer durables sector declined by 9.3 per cent in July, compared to growth of 0.8 percent in the same month last year. On cumulative basis, Indian consumer durable sector witnessed a 12 percent decline in output in April-July as compared to 6.1 percent growth in the same period of previous fiscal. In Auto sector, the demand of vehicles is also adversely hit by the rising inflation and existing economic downturn. The two-wheeler sales recorded a flat growth of 0.72 percent in April-August period current fiscal, as against a growth of 6.8 percent in the corresponding period last year. The latest government’s move is expected to support these sectors by increasing demand during the festive season, starting with Onam and going on till Diwali, which is considered as a crucial time for consumer durables and auto industry sales. Festival season contributes almost 25-30 percent to the year's turnover for Indian consumer durable industry.

The CNX Nifty is currently trading at 5,895.25 down by 14.45 points or 0.24% after trading in a range of 5,949.15 and 5,885.00. There were 18 stocks advancing against 30 declines and one stock remained unchanged on the index.

The top gainers of the Nifty were Tata Motors up by 3.82%, BPCL up by 2.19%, Lupin up by 1.72%, UltraTech Cement up by 1.52% and TCS up by 1.37%. On the flip side, JP Associate down by 3.06%, Tata Power down by 2.03%, Jindal Steel down by 1.85%, Ranbaxy down by 1.80% and IndusInd Bank down by 1.70% were the major losers on the index.

Most of the Asian equity indices were trading in red; Hang Seng declined 0.53%, Jakarta Composite shed 0.77%, Nikkei 225 contracted 0.21%, Seoul Composite dipped 0.06%, Straits Times was down by 0.06% and Taiwan Weighted was down by 0.17%, while KLSE Composite rose 0.17%.

China’s markets remained closed for trade today on account of National Day holiday