Post Session: Quick Review

While, the start of ‘Year 2014’ was mildly on a negative note, the second day of trade was devastating. Intra-day trend reversal which took place, literally took traders for surprise, as what started as an extremely promising session of trade turned out to be nothing less than catastrophe, with markets clocking loss of over a percent. Profit-booking hit the blue-chips in late-trade and took the steam out of the markets, which in the morning deals were trading close to their record high levels. Reportedly, late sell-off could also be blamed to repositioning in foreign portfolios at the start of new calendar year. Further, weaker manufacturing data also deterred sentiment to some extent. On the macro-front, after picking up pace in the past three consecutive months, India's manufacturing sector, decelerated marginally in December as a slowdown in domestic order flows led to slower output growth. The HSBC India Manufacturing Purchasing Managers' Index (PMI) - a measure of factory production - dropped from 51.3 in November to 50.7 in December. In backdrop of mixed global cues and absence of positive triggers at home front, both Sensex and Nifty, ended at day’s low point, below the crucial 20,900 and 6,250 levels respectively. The cuts were nastier for broader indices, which went home with loss of close to two percent.

On the global front, Asian shares weakened in light trade Thursday, starting the New Year with Japan markets shut for a holiday and muted data out of China. The December HSBC China Manufacturing PMI came in at 50.5, unchanged from the flash reading and on forecast. On the flip side, European shares touched fresh 5-1/2 year highs on Thursday, making a steady start to the New Year after rounding off 2013 with their best annual performance in four years.

Closer home, benchmarks after trading strength to strength in early deals, started coming off from day’s high in afternoon deals as traders cashed in their profits at higher levels. The scenario completed reversed as none of the sectoral indices were spared in green by the close of trade, barring defensive Information Technology counter. Massive drubbing came to banking stocks, which were the top gainers of the session in early deals on expectation that weak growth and an easing of inflation will spur the RBI to keep policy on hold later this month. Additionally, entire power pivotal was beaten blue in trade after the Delhi government, rejecting the contention of private power distributors, ordered an audit of their finances by the government's national auditor or Comptroller and Auditor General (CAG), fulfilling yet another election promise of the Aam Aadmi Party (AAP). Out of the entire space, Adani Power fell the most after Mumbai unit of the Directorate of Revenue Intelligence (DRI) formally opened  a case for alleged 'over-valuation' of capital equipment for power projects  against the Gujarat-based group, widely regarded as close to Narendra Modi,  BJP's prime ministerial candidate. According to an internal DRI report compiled in December, the agency is 'investigating gross overvaluation of import of equipment and machinery by various entities of Adani Group from a UAE-based intermediary. The market breadth on the BSE ended in red; advances and declines were in a ratio of 1050: 1551, while 130 scrips remained unchanged. (Provisional)

The BSE Sensex lost 277.77 points or 1.31% to settle at 20862.71.The index touched a high and a low of 21331.32 and 20846.67 respectively. Among the 30-share Sensex, 5 stocks gained, while 25 stocks declined. (Provisional)

The BSE Mid cap and Small cap indices ended lower by 1.88% and 2.01% respectively. (Provisional)

On the BSE Sectoral front, IT up by 0.09% was the only gainer, while Realty down by 3.33%, Capital Goods down by 3.09%, PSU down by 2.24%, Power down by 2.21% and Bankex down by 2.03% were the top losers in the space. (Provisional)

The top gainers on the Sensex were TCS up by 0.50%, Maruti Suzuki up by 0.38%, Sun Pharma up by 0.35%, Infosys up by 0.29% and  Wipro up by 0.14%, while, Tata Power down by 3.54%, BHEL down by 3.48%, L&T down by 3.31%, Bharti Airtel down by 2.78% and ONGC down by 2.50% were the top losers in the index. (Provisional)

Meanwhile, after picking up pace in the past three consecutive months in the previous month, India's manufacturing sector, decelerated marginally in December as a slowdown in domestic order flows led to slower output growth. The HSBC India Manufacturing Purchasing Managers' Index (PMI) - a measure of factory production - dropped slightly from 51.3 in November to 50.7 in December. Nevertheless, despite a slight deceleration, the manufacturing sector activity expanded for the second consecutive month as the PMI reading stood above the watershed 50 mark, which differentiates growth from contraction.

However, as per the survey, the Indian manufacturing sector ended 2013 on an encouraging footing, as operating conditions improved for the second successive month in December, given that both output and new orders increased. Consequently, firms raised their workforce numbers further in December, the survey noted. Despite the fall in the factory output growth, new orders placed at Indian manufacturers rose in December, albeit marginally. The higher level of new work was largely driven by improved domestic and overseas demand. A sub-index, measuring overall new orders fell to 51.3, from 51.9 in November, which prompted firms to decrease the pace of output growth last month.

Meanwhile, a sector-wise analysis showed that the overall expansion in production volumes was largely focused on the consumer goods sub-sector. Moreover, export order growth was registered for the third consecutive month. Although quickening since November, the overall rate of expansion was modest and below the series average.

Further, Indian manufacturing employment rose in December, stretching the current period of job creation to three months. However, the rate of growth was only marginal. On the pricing front, the overall rate of inflation remained robust. Although, purchasing costs increased at the slowest pace for four months, Output prices rose for the seventh month in a row.

Thus, the latest reading shows that growth remains moderate and struggles to take off due to lingering structural constraints. Even so, inflation pressures remain firm and proving to be sticky. With this, RBI may yet again have to flex its muscles and tighten monetary policy to bring down the elevated level of inflation. Raghuram Rajan, the central bank governor, has made fighting inflation a priority after his appointment in September and has raised the repo rate twice since to bring it to 7.75 percent. India VIX, a gauge for markets short term expectation of volatility gained 6.22% at 16.55 from its previous close of 15.58 on Wednesday. (Provisional)

The CNX Nifty lost 86.25 points or 1.37% to settle at 6,215.40. The index touched high and low of 6,358.30 and 6,211.30 respectively. Out of the 50 stocks on the Nifty, 6 ended in the green, while 44 ended in the red.

The major gainers of the Nifty were Power Grid up 2.21%, TCS up by 0.68%, Infosys up by 0.47%, Sun Pharmaceuticals up by 0.38% and Maruti Suzuki up by 0.34%. The key losers were IDFC down by 4.83%, JP Associate down by 4.59%, PNB down by 4.08%, Tata Power down by 3.65% and L&T down by 3.23%. (Provisional)

Most of the European markets were trading in red with, France’s CAC 40 down by 0.93%, the United Kingdom’s FTSE 100 down by 0.36% and Germany’s DAX down by 0.52%.

The Asian markets concluded Thursday’s trade mostly in green, on the first trading day of 2014, while Chinese stocks moved lower after manufacturing data came out poorer than expected. Although regional stocks started the day mostly higher, they weakened after HSBC’s PMI release. Thailand’s baht fell for an 11th day, the longest losing streak on record, and stocks slid on concern capital outflows will quicken amid prolonged political unrest in the country. China’s official Purchasing Managers’ Index, pointed to slowing momentum in factory activity. The December reading was 51.0 - slower than 51.4 in the previous month, but still above the 50 mark that indicates an expansion in manufacturing. It was followed by a similar deceleration in HSBC’s PMI, which came out at 50.5 for December, compared with 50.8 in November.

Singapore’s economy contracted in the fourth quarter mainly as a result of weaker manufacturing and construction. Gross domestic product for the three months to December 31 contracted 2.7% on a seasonally adjusted and annualized basis compared with a revised 2.2% increase in the third quarter. Indonesia’s trade posted a surplus for two consecutive months in November, bolstering indication that the country’s current account deficit is narrowing. It was also the largest monthly trade surplus since March 2012. The country posted a $776.8 million trade surplus in November, compared to a revised $24 million surplus in October.