Benchmarks extend early gains amid better than expected December WPI inflation number

Indian equity benchmarks extended early gains and reached at their intra-day high level in afternoon session as buying witnessed in frontline blue chip stocks including Hero motocorp, Hindalco Inds and Cipla among others. Investors’ sentiments got a boost after the December WPI inflation number recorded at 6.16% as compared to 7.52% in the previous month November. Furthermore, firm global cues also added to the optimistic sentiment. All major indices on BSE were trading in green except FMCG. On sector front, Metal was top gainer on BSE up by around 1.56% followed by capital goods and auto indices both up by over 0.90%. On stock specific movement, Hero Motocorp, Hindalco Inds and Cipla were trading up by over 2.00%, while, ITC, Axis Bank and Maruti Suzuki were trading marginally lower on BSE. Shares of Tata Consultancy Services, after hitting an intra-day high of Rs 2,377 on the BSE, were up nearly 1.5% at Rs 2,363, on expectation of robust earnings for Q3FY14.  Among other stocks, Shares of Liberty Shoes were down around 3% at Rs 151 on profit booking after the firm posted better results for Q3FY14.

On global front, Asian shares were trading in green with Jakarta Composite up by 1.25% and Nikkei 225 up by 2.31%. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 6,300 and 21,000 levels respectively. The market breadth on BSE was positive, out of 2,303 stocks traded, 1,311 stocks advanced, while 855 stocks declined on the BSE.

The BSE Sensex is currently trading at 21,225.68 up by 192.80 points or 0.92% after trading in a range of 21,241.42 and 21,091.46. There were27 stocks advancing against only 3 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.40%, while Small cap index up by 0.63%.

The gaining sectoral indices on the BSE were Metals up by 1.56%, Capital Goods up by 1.27%, Auto up by 0.95%, Bankex up by 0.94% and Teck up by 0.80%. While, FMCG down by 0.20% was the only losing index on BSE.  

The top gainers on the Sensex were Hero Motocorp up by 2.51%, Hindalco Inds up by 2.24%, Cipla up by 2.12%, SSLT up by 2.05% and HDFC up by 1.69%. On the flip side, ITC down by 0.39%, Axis Bank down by 0.37% and Maruti Suzuki down by 0.18%.

Meanwhile, amid rising concerns over the deteriorating economic fundamentals of the country, the rating agency India Ratings has lowered its Indian economic growth forecast to 4.9 percent in the current fiscal. However, the agency added that the growth is likely to improve significantly to 5.6 percent in FY'15 on the back of partial recovery in the industrial and services sector growth, and an uptick in investments owing to the project clearances by the Cabinet Committee on Investment (CCI). Indian economic growth slowed down to decade low at 5 percent in the FY'13.

Further, India Ratings stated that Indian economy’s growth outlook is looking significantly better now as compared to mid-2013 when the country was struggling with current account and fiscal deficit, falling rupee and high and stubborn inflation. The factors like rising exports, better-than-expected monsoons, swift policy as well as project clearance actions by the government and deft currency management by the RBI have improved business sentiments in the country. The ratings agency has estimated the economic growth at 5.6 percent in FY'15 with agriculture sector expanding at 3 percent, industry at 4.1 percent and services at 6.9 percent.

Referring to the inflation in the country, the ratings agency has expected pressure on food prices to ease in FY'15 on the back of normal monsoons and projected average WPI-based inflation to decline to 5.5 percent in FY'15, from around 5.9 percent in current fiscal. Furthermore, the agency expects that with the expected moderation in inflation in FY'15, the RBI's policy stance to gradually shift towards monetary easing. Regarding the country’s fiscal deficit, Indian rating has stressed that Indian fiscal deficit will narrow to 4.5 percent in FY'15 as the new government formed, will make efforts to adhere to fiscal consolidation. The agency expects fiscal deficit to remain closer to the budgeted level of 4.8 percent in current fiscal.

Indian Ratings further added that Indian exports are likely to continue to grow in FY'15 on the back of economic recovery in the US and EU nations. Restrictions on gold imports and stable oil prices would restrict import growth and restrict Current Account Deficit to 2.2 per cent of GDP in FY'15. Regarding the exchange rate, India Ratings projected the rupee to settle at around 56-57 to a US dollar by the end of March 2015.

The CNX Nifty is currently trading at 6,300.95 up by 59.10 points or 0.95% after trading in a range of 6,304.05 and 6,265.30. There were 44 stocks advancing against 6 declining on the index.

The top gainers of the Nifty were NMDC up by 3.47%, Hindalco Inds up by 2.61%, Cipla up by 2.36%, Hero Motocorp up by 2.35% and SSLT up by 1.97%. On the flip side, Ranbaxy down by 1.10%, Cairn down by 0.74%, Axis bank down by 0.53%, Lupin down by 0.46% and ITC down by 0.39% were the major losers on the index.

The Asian equity indices were trading in green; Jakarta Composite up by 1.25%, Nikkei 225 up by 2.31%, Seoul Composite up by 0.36%, , Taiwan Weighted up by 0.64%, Straits Times up by 0.55% and  Hang Seng up by 0.44%. While, Shanghai Composite down up by 0.40% and KLSE Composite down by 0.29%.