Indian equities climb to the session’s highs in Friday noon trades

Indian equity markets managed to capitalize on the momentum in the afternoon trading session on Friday and the benchmarks are currently trading at the day’s highs, inching closer towards the psychological 16,600 (Sensex) 5,000 (Nifty) levels. Investors are relentlessly piling up positions in the rate sensitive banking index, for a second straight session thanks to the report released by global rating agency S&P’s which affirmed investment grade with stable outlook to ten Indian banks - SBI, Axis Bank, Bank of India, HDFC Bank, ICICI Bank, IDBI Bank, IOB, Syndicate Bank, UBI and Indian Bank. The beaten down metal counter also witnessed hefty buying while the information technology shares too went up after the US manufacturing data suggested that world’s largest economy is gradually gaining momentum. On the global front, most Asian shares traded on a subdued note a day after staging a remarkable rally, however, the European futures showed that the markets there would get off to an optimistic opening ahead of the release an important US employment data and a crucial speech by German Chancellor.  Moreover, the broader markets too traded on a positive note in tandem with their larger peers. The bourses spurted on good volumes of over Rs 0.60 lakh core. The market breadth on BSE was in favor of advances in the ratio of 1396:1102 while 120 scrips remained unchanged.

The BSE Sensex is currently trading at 16,566.97 up by 83.52 points or 0.51% after trading as high as 16,569.81 and as low as 16,428.66. There were 20 stocks advancing against 10 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index climbed 0.53% and Small cap gained 0.39%.

On the BSE sectoral space, Bankex up 1.20%, Metal up 1.05%, IT up 0.87%, Auto up 0.86% and Consumer Durables up 0.85% were the major gainers while Realty down 0.35% and Oil & Gas 0.22% were the only losers in the space.

Maruti up 2.65%, Tata Steel up 2.48%, Sterlite up 2.23%, Tata Motors up 1.83% and JP Associates up 1.54% were the major gainers on the Sensex, while Bharti Airtel down 1.04%, Tata Power down 0.81%, Hero Moto down 0.79%, ONGC down 0.60% and RIL down 0.33% were the major losers in the index.

Meanwhile, India’s factory output slowed in the month of November. The manufacturing sector grew at its slowest pace in nearly three years though export demand is likely to provide some cheer for factories. However, there is an enhancement in business conditions in the Indian manufacturing sector; the rate of growth was marginal and weak. Production was mainly hindered by weaker rise in new business and delays caused by power cuts. Employment declined for the fourth successive month.

The HSBC Markit India Manufacturing Purchasing Managers’ Index PMI fell to 51.0 from 52.0 in October, but has stayed above the 50 mark that divides growth from contraction for 32 months. The PMI was 50.4 in September. Whereas, the factory output index declined to a near 3-year low of 50.5, the new orders index, an indicator of future output, fell after a surge in October indicating the sector is close to stalling.

As per the survey, Indian manufacturers reported a 32 successive increase in new business received during November. However, the rate of expansion slowed from October and was second weakest in the current sequences of growth. On the other hand, new export orders showed marginal increase. However, this reflected an improvement on contractions recorded over the previous four survey periods.

Although the slowdown in output growth was more remarkable than the new business, the weaker increase in output was due to production delays caused by power cuts, along with the slower increase in new orders, which highlights the backlogs of work increased solidly. In November, purchasing activities also increased. However, the input prices faced by manufactures increased substantially in November. Higher raw material prices were the main reason for the surge in cost. 

Commenting on the India Manufacturing PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said 'Economic activity in the manufacturing sector continues to grow at a slower clip led by a deceleration in domestic orders. Despite this, manufacturers still struggle to keep up with new orders and inflation pressures are not abating. This suggests that the RBI will have to keep monetary conditions tight for an extended period.' Since March 2010, the Reserve Bank of India (RBI) has raised its lending rate 13 times, but inflation has remained uncomfortably high at more than 9% for 11 consecutive months. This 13 rate hike in RBI’s repo and reverse repo rates has adversely affected the economic activities and investment rates. India’s economy, in July-September 2011 grew by 6.9% compared to 7.7% in April-June 2011. This decline in economic growth was due to fall in manufacturing sector, which accounts for 16% of India’s GDP, it grew by 2.7%  in second quarter of 2011-12 compared to 7.2% in the same quarter of last year.  

The S&P CNX Nifty is currently trading at 4,962.65, higher by 25.80 points or 0.52% after trading as high as 4,963.85 and as low as 4,918.40. There were 34 stocks advancing against 16 declines on the index.

The top gainers on the Nifty were Ambuja up 4.40%, Maruti up 2.58%, Tata Steel up 2.48%, IDFC up 2.40% and Tata Motors up 2.05%.

Sesa Goa down 1.64%, Ranbaxy down 1.50%, Bharti Airtel down 1.11%, Tata Power down 0.86% and ONGC down 0.83% were the major losers on the index.

Asian markets traded on a discouraging note, Shanghai Composite plunged 1.10%, Hang Seng declined 0.16%, Jakarta Composite shed 0.57%, KLSE Composite eased 0.05%, Straits Times dropped 0.49%, Seoul Composite fell 0.01% and Taiwan Weighted dipped 0.53%.

On the flipside only Nikkei 225 climbed 0.54%.