Markets trade lower in early deals on weak global cues

Extending previous session's southward journey, Indian equity benchmarks have made a negative start and are trading in red terrain with a cut of around half a percent in early deals on Friday amid weak global cues. Overnight, US stocks fell on their first day of trading in 2014 as traders looked cashing in their recent gains coupled with concerns about the outlook for the global economy. Moreover, all the Asian equity markets were trading in the red at this point of time with Chinese markets declining around one and half a percent after Growth in the country’s services sector fell to a four-month low in December as business expectations dropped.

Back home, sentiments also remained dampened after Indian rupee depreciated to two-week low of 62.36/37 per dollar versus previous close of 62.26/27 per dollar. Shares of public sector oil marketing companies (OMCs) like, BPCL, HPCL and IOC remained under pressure, as the government has said that it will "look into" a demand to raise the quota of subsidised LPG cylinders to 12 per household in a year from the current limit of nine. Meanwhile, marketmen opted wait and watch approach ahead of the press conference of the Prime Minister where he will seek to dispel the perception of policy paralysis and will also highlight the steps taken to boost the economy.

Back home, on the sectoral front, consumer durables witnessed the maximum gain in trade followed by software and technology, while auto, capital goods and power remained the top losers on the BSE sectoral space. The broader indices, however, outperforming benchmarks, while the market breadth on the BSE was positive; there were 636 shares on the gaining side against 572 shares on the losing side while 57 shares remain unchanged.

The BSE Sensex opened at 20819.58; about 68 point lower compared to its previous closing of 20888.33, and has touched a high and a low of 20856.53 and 20763.43 respectively. The index is currently trading at 20805.72, down by 82.61 points or 0.40%. There were 5 stocks advancing against 25 declines on the index.

The overall market breadth has made a strong start with 51.68% stocks advancing against 44.58% declines. The broader indices were trading in green; the BSE Mid cap and Small cap indices up by 0.25% and 0.38% respectively. 

The top gaining sectoral indices on the BSE were, Consumer Durables up by 0.81%, IT up by 0.62% and Teck up by 0.51%, while Auto down by 0.93%, Capital Goods down by 0.91%, Power down by 0.82%, Metal down by 0.61% and Bankex down by 0.44% were the top losers on the sectoral index. 

The top gainers on the Sensex were Maruti Suzuki up by 1.17%, TCS up by 0.82%, Infosys up by 0.71%, HDFC Bank up by 0.65% and ONGC up by 0.62%. On the flip side, Tata Motors was down by 2.29%, Mahindra & Mahindra was down by 1.96%, Tata Power was down by 1.83%, BHEL was down by 1.48% and Axis Bank was down by 1.32% were the top losers on the Sensex.

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.

The CNX Nifty opened at 6,194.55; about 26 points lower as compared to its previous closing of 6,221.15, and has touched a high and a low of 6,209.05 and 6,178.85 respectively. The index is currently trading at 6,196.40, down by 24.75 points or 0.40%. There were 14 stocks advancing against 36 declines on the index.

The top gainers of the Nifty were Maruti Suzuki up by 1.00%, Ranbaxy up by 0.99%, TCS up by 0.60%, IDFC up by 0.57% and Infosys up by 0.53%. On the flip side, Tata Motors down by 2.24%, M&M down by 1.89%, BHEL down by 1.80%, Tata Power down by 1.43% and Grasim down by 1.29% were the major losers on the index.

The Asian equity indices were trading in red; Shanghai Composite declined 28.79 points or 1.36% to 2,080.60, Hang Seng tumbled 407.52 points or 1.75% to 22,932.53, Jakarta Composite crumbled 49.40 points or 1.14% to 4,277.87, KLSE Composite decreased 13.59 points or 0.73% to 1,839.36, Straits Times shed 19.89 points or 0.63% to 3,154.76, Seoul Composite contracted 23.93 points or 1.22% to 1,943.26 and Taiwan Weighted was down by 65.52 points or 0.76% to 8,547.02.