Exceptional trade deficit data fortify benchmarks; Nifty re-conquers 6,000 mark

Indian equity benchmarks, despite negative opening, snapped the session near their high point of day, as investors turned bullish following better-than-expected trade deficit data in September. Earlier, the markets opened in the red following report that International Monetary Fund (IMF) further cut India’s current fiscal growth projection to 3.8% from 5.6% as projected in July and 5.7% as expected in April. It has said that growth in India has slowed down more than anticipated and the country must maintain fiscal and monetary credibility in order to prevent capital outflows. But, sentiments took u-turn after India’s trade deficit narrowed to a two-and-a-half-year low at $6.76 billion in September, compared with $10.9 billion in August, after India’s exports posted double digit growth for third consecutive month, and with imports sliding for the fourth month in a row.

Meanwhile, India’s exports during September, 2013 grew by 11.15% at $27.68 billion as compared to $24.90 billion during September 2012, thanks to stronger demand from Western nations and increased competitiveness. On the same time, steep decline of imports for fourth consecutive month was witnessed on account of sharp slide of gold imports to $0.8 billion in September as compared to $4.6 billion in September 2012. After the trade data, there appeared not even an iota of profit booking in the session, as the benchmarks managed to fervently gain from strength to strength as investors continued hunt of fundamentally strong but oversold stocks. Frontline indices managed to finish the session above their intraday high and settled comfortably above 6,000 (Nifty) and 20,200 (Sensex) levels as investors took to hefty across the board buying.

On the global front, most of the Asian equity benchmarks, after a negative opening, ended the session in the green as sentiments turned positive on report that President Barack Obama will nominate Janet Yellen as Federal Reserve chairwoman gradually trumped concerns over a partial government shutdown in the US. Moreover, European markets too pared their initial losses and were trading mostly in the green terrain in early deals.

Back home, some support also came in from report that foreign institutional investors bought shares worth Rs 226.32 crore while domestic institutional investors were net sellers worth Rs 454.35 crore on October 8, 2013. Recovery in Indian rupee too boosted the markets up-move, while the rally in auto counter supported the sentiments with stocks like TVS Motors, Bajaj Auto, Hero Motocorp, Tata Motors etc edging higher as festive season kicks in. Additionally, banking stocks like Bank of India, YES Bank, IndusInd Bank, Bank of Baroda, HDFC Bank and Kotak Mahindra Bank too edged higher after September trade deficit narrowed at $6.7 billion against $10.91 billion in August.

The NSE’s 50-share broadly followed index Nifty rose around eighty points to regain its psychological 6,000 level, while Bombay Stock Exchange’s Sensitive Index -- Sensex surged by around two hundred and seventy points to end above its psychological 20,200 mark.

Moreover, broader markets traded with great traction and ended the session with a gain of over half a percent. The market breadth remained in favour of advances, as there were 1,408 shares on the gaining side against 1,025 shares on the losing side, while 175 shares remained unchanged.

Finally, the BSE Sensex surged 265.65 points or 1.33%, to settle at 20249.26, while the CNX Nifty gained 79.05 points or 1.33% to settle at 6,007.45.

The BSE Sensex touched a high and a low of 20277.74 and 19826.96, respectively. The BSE Mid cap index was up by 0.84% and Small cap index gained 0.54%.

The top gainers on the Sensex were Sun Pharma up 5.09%, Bajaj Auto up 2.79%, HDFC Bank up 2.57%, Infosys up 2.48% and BHEL up 2.25%, on the flip side, Wipro down 1.19%, Sesa Sterlite  (SSLT) down 1.05%, Mahindra & Mahindra down 0.99%, Cipla down 0.74%, and Maruti Suzuki down 0.64%, were the top losers on the index. 

On the BSE Sectoral front, Realty up by 4.27%, Healthcare up by 1.88%, Bankex up by 1.88%, Capital Goods up by 1.86%, and Power up by 1.57%, were the top gainers, while Consumer Durables down by 0.36%, was the only loser on the sectoral front.

Meanwhile, as per the Paris-based think-tank Organisation for Economic Cooperation and Development (OECD), Indian economy is likely to witness a mediocre average annual growth of 5.9 percent during the 2014-18 period owing to the prevailing macroeconomic weaknesses. The OECD’s forecast for the country is much lower than its projected growth for overall Emerging Asia at 6.9 percent during the same period.

Regarding Indian economic growth, the OECD highlighted that prevailing macro-economic weakness in India particularly widening current account deficits (CAD) has raised concerns over its economic growth. The country CAD widened to a record high of 4.9 percent of GDP in the April-June quarter, 2013 on account of high gold imports and crude oil prices. High CAD also remained the main cause for rupee depreciation, which recently depreciated to a record low of over 68.50 against the US dollar.

Referring to the growth in emerging Asian economies, OECD said that growth in Emerging Asia comprising Southeast Asian nations, China and India would remain robust at 6.9 percent during the 2014-18 period on the back of steady rise in domestic demand. Meanwhile, the projected growth in the region is less than the 8.6 percent registered before the global financial crisis (2000-07). The slower rate of growth is mainly due to the moderate rates of expansion in the two largest Emerging Asian economies of China and India. Further, the report highlighted that ongoing volatility in financial markets, triggered by the prospects of tapering of quantitative easing in the US, may trigger crisis in the emerging Asia.

The CNX Nifty touched a high and low of 6,015.50 and 5,877.10 respectively.

The top gainers on the Nifty were DLF up by 5.98%, Sun Pharmaceuticals Industries up by 5.73%, Jaiprakash Associates up by 4.35%, Kotak Mahindra Bank up by 4.02% and IDFC up by 3.52%. On the other hand, Wipro down by 1.54%, Mahindra & Mahindra down by 1.41%, Sesa Sterlite down by 1.02%, Cairn India down by 0.68%, and BPCL down by 0.60%, were the top losers.

The European markets were trading in green, France’s CAC 40 was up by 0.58%, Germany’s DAX was up by 0.18%, and United Kingdom’s FTSE 100 was up by 0.03%.

Most of the Asian markets concluded Wednesday’s trade in green despite stalemate in Washington which increased fears that the world’s largest economy might breach the federal debt ceiling, causing the Treasury to default on debt. South Korea Stock Exchange was closed today on account of ‘Hangul Day’. Indonesia’s rupiah forwards fell the most in more than a week on concern that slowing global economic growth will hurt the nation’s exports, which dropped for a 17th month in August. The International Monetary Fund cut its expansion outlook for the global economy this year to 2.9 percent from an earlier projection of 3.1 percent.

The IMF cuts its growth forecast for China, Indonesia’s biggest overseas market, to 7.3 percent next year from an April projection of 8.2 percent. The IMF reduced its prediction for 2014 growth in Japan, Indonesia’s No. 2 export destination, to 1.2 percent from 1.4 percent. The Washington-based lender cut its expansion forecast this year for Indonesia to 5.3 percent from 6.3 percent and for 2014 to 5.5 percent from 6.4 percent. The HSBC China Services Business Activity Index, a gauge of operating conditions in service firms geared toward private enterprises, was 52.4 last month, down from 52.8 in August. Activity in private service companies grew at a slower pace in September, indicating weakness in China’s economy although it has been recovering strongly in the past few months.