Benchmarks recover from day’s low; weakness yet persists

Benchmark equity indices, although have recovered from day’s low are yet trading weak on account of investors’ reluctance to add position near all time high level touched by the local equity markets amidst mostly negative regional cues. However, sentiment too some extent received fillip after HSBC Services Purchasing Managers' Index (PMI), compiled by Markit, recovered from four years low at 47.1 in October against 44.6 in September. Further, upgrade of India’s economy to ‘Market-weight’ by global investment bank, Goldman Sachs, which also scaled Nifty index target to 6900, for 2014-end which implies nearly 9 per cent potential upside from current levels, also provided some support to bourses. Thus, bouncing off lows, while Sensex has reclaimed the crucial 21,100 mark, Nifty is at striking distance of 6300 mark. Meanwhile, broader indices outperforming larger peers by fat margins, have further added some ground.

On the global front, Asian pacific shares sagged on Tuesday after hawkish comments from China's premier ahead of a key Communist Party meeting, though expectations that the U.S. Federal Reserve will maintain its stimulus for a while limited losses. Premier Li Keqiang said in speech published in full late on Monday that adding extra stimulus would be more difficult since printing new money would cause inflation.

Closer home, led by recovery in Banking, Public Sector Undertaking stocks, benchmarks have bounced back from day’s low point. Nevertheless, Realty counter is leading the market from the front, while stocks from Fast Moving Consumer Goods, Consumer Durables and Information Technology counters are the top laggards. The overall market breadth on BSE is in the favour of advances which are outperforming declines in the ratio of 940:862; while 36 shares remained unchanged.

The BSE Sensex is currently trading at 21112.32, down by 127.04 points or 0.60% after trading in a range of 21,158.56 and 21000.29. There were 10 stocks advancing against 20 declines on the index.

The broader indices continued to outperform larger peers by fat margins; while BSE Mid cap index was up by 0.75%, Small cap index gained 0.60%.

The gaining sectoral indices on the BSE were Realty up by 1.31%, Bankex up by 0.78%, PSU up by 0.43%, Auto up by 0.25% and Power up by 0.02%. While, FMCG down by 1.89%, Consumer Durables down by 1.24%, IT and Health Care down by 1.07% and Teck down by 1.04% were losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 2.16%, Coal India up by 1.13%, SBI up by 1.07%, HDFC up by 0.86% and RIL up by 0.61%. On the flip side, ITC down by 2.54%, TCS down by 2.15%, Sun Pharma down by 2.00%, SSLT down by 1.95%, and Dr Reddy’s Lab down by 1.72% were the top losers on the Sensex.

Meanwhile, after slumping to over four years low level in September, the activity in services sector, which makes up of nearly 60% of country’s economic output, rose from 46.1 to 47.5 in October. Nonetheless, HSBC India Composite Output Index posted below the 50.0 no-change mark for the fourth successive month in October, indicating a further contraction.

Sector data indicated a fall in business activity in five out of the six categories monitored by the survey, with the sharpest decline noted at Hotels & Restaurants. Further, the lower levels of private sector output mirrored a further decrease in new business flows. Although the PMI's new business index edged up to 48.0 in October from 45.0 in September, it was the fourth month running that demand has declined. While, the incoming new work contracted at slower pace in services, it quickened for manufacturing.

On the employment front, four of the six monitored service categories posted job shedding, the exceptions being Renting & Business Activities and ‘Other Services. Meanwhile, Inflation rates in the Indian private sector rose during October, with input prices increasing at the quickest pace in 16 months and the rate of charge inflation climbing to a seven-month high.

However, in a positive sign, robust optimism regarding output growth in the coming year was sustained during October. Launch of new services, planned increases in marketing budgets and forecasts of better economic conditions are indicated to support demand growth in the year ahead as per the survey.

Nevertheless, continued contraction in service sector activity is testament to the dampening effects of the heightened macroeconomic uncertainty, which is making businesses and consumers more cautious about spending. Worryingly, the survey also underscores that Reserve Bank of India would have to keep up its inflation guards up to address the lingering inflation pressures. These view echoes with the view of manufacturing PMI data, which also asserted that India’s Apex Bank will have to continue its staring contest with inflation.

The CNX Nifty is currently trading at 6,297.35, down by 20.00 points or 0.32% after trading in a range of 6,297.95 and 6,247.55. There were 23 stocks advancing against 27 declining on the index.

The top gainers of the Nifty were PNB up by 3.99%, DLF up by 3.33%, Axis Bank up by 2.62%, IndusInd Bank up by 2.50% and Tata Motors up by 2.30%. On the flip side, Power Grid down by 2.90%, ITC down by 2.56%, Sun Pharma down by 2.12%, TCS down by 2.10% and SSLT down by 1.95% were the major loser on the index.

The Asian equity indices were trading mostly lower; Shanghai Composite up by 0.21%, Straits Times up by 0.26%, and Nikkei 225 up by 0.17%,. While, Seoul Composite down by 0.56%, KLSE Composite down by 0.16%, Hang Seng down by 0.43%, Jakarta Composite down by 0.21% and Taiwan Weighted down by 1.10%.