Benchmarks struggle to gain traction after slipping into negative territory

In the dilly-dally session of trade, benchmarks equity indices after slipping in negative terrain are struggling to gain traction in the absence of buying trigger which could take markets higher. Prevailing caution ahead of RBI’s policy review on January 28, 2014, is mainly weighing on the sentiment after earlier expectations for the RBI to hold rates have been thrown into doubt after the central bank recommended making taming high consumer inflation a priority. Additionally, negative global set-up is also adding to the pessimistic milieu. Although, trading with marginal loss of over one tenth of a percent, both Sensex and Nifty, are holding above crucial 21,300 and 6,350 levels respectively. Meanwhile, broader indices are trading mixed at this point of time.

On the global front, Asian markets fell on Thursday after a survey of Chinese manufacturers proved surprisingly soft. The flash Markit/HSBC Purchasing Managers' Index (PMI) fell to 49.6 in January, from December's 50.5, suggesting a mild slowdown at the end of 2013 has continued into the New Year.

Closer home, while majority of the sectoral indices on BSE held in red, stocks from Capital Goods, Healthcare and Consumer Durable counters were the outperformers. On the flip side, massive selling was witnessed in Auto, Oil & Gas and Realty counters. Additionally, IT stocks too were trading lower despite Rupee’s depreciation, which is usually a positive factor for these stocks that derive lion share of their revenue in US dollars. The overall market breadth on BSE is in the favour of declines which are outpacing advances in the ratio of 1002:806; while 34 shares remained unchanged.

The BSE Sensex is currently trading at 21324.52 down by 13.15 points or 0.06% after trading in a range of 21,355.34 and 21,264.71. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices continued to trade mixed; the BSE Mid cap index was down by 0.30%, while Small cap index up by 0.11%.

The gaining sectoral indices on the BSE were Capital Goods up by 1.87%, Healthcare up by 0.23%, Consumer Durables up by 0.12% and Power up by 0.05%. While, Auto down by 0.71%, Oil & Gas down by 0.61%, IT down by 0.52%, Realty down by 0.51% and PSU down by 0.41% were the top losing indices on BSE.  

The top gainers on the Sensex were L&T up by 2.38%, BHEL up by 1.95%, Gail India up by 1.91%, Sun Pharma up by 1.40% and Bharti Airtel up by 1.18%. On the flip side, M&M down by 2.78%, ONGC down by 1.50%, RIL and ICICI down by 1.02% and Tata Steel down by 1.01% were the major losers on the Sensex

Meanwhile, ahead of the Reserve Bank of India (RBI) monetary policy meet on January 28, Economic Affairs Secretary Arvind Mayaram has stated that signs of moderation in WPI inflation have strengthened the case for a cut in interest rates to boost economic growth. Arvind Mayaram has emphasized that there could not be a case for rate hike by the central bank at this point of time when industrial growth continues to be in the red, prevailing sluggish investments scenario and low employment opportunities in the country. WPI inflation eased to five-month low at 6.16% in December as compared to 7.52% in November and 7.31% during the corresponding month of the previous year.

Meanwhile, the central bank had already noted the fight to tame inflation would remain its top of agenda and has been continually raising the policy rates over the past few months. Prevailing high interest rates scenario in economy has been adversely impacting the growth of Indian industries. Indian industrial output registered the worst performance in six months with contraction of 2.1% in November on y-o-y basis as compared to 1.8% in October. Indian industrial production growth contracted by 0.2% during the April-November 2013-14 period from a year earlier owing to the high interest rates and prevailing economic downturn.

Earlier, India Inc had also urged the Reserve Bank to lower interest rates in order to provide boost to the growth of Indian industries. India Inc added that achieving a sustained moderation in WPI is an issue for the country, however, the recently released inflation number gives scope for cutting the interest rates in a bid to improve domestic supply response.

The CNX Nifty is currently trading at 6,332.35, down by 6.60 points or 0.10% after trading in a range of 6,342.90 and 6,316.40. There were 21 stocks advancing against 27 declining on the index.

The top gainers of the Nifty were Jindal Steel up by 2.60%, L&T up by 2.53%, Gail up by 2.00%, BHEL up by 1.62% and Cairn up by 1.49%. On the flip side, HCL Tech down by 2.95%, M&M down by 2.83%, ONGC down by 1.67%, Tata Steel down by 1.30% and Reliance down by 1.08% were the major losers on the index.

Most of the Asian equity indices were trading in red; Seoul Composite down by 1.16%, Shanghai Composite down by 0.31%, Nikkei 225 down by 0.79%, Hang Seng down by 1.53%, Taiwan Weighted down by 0.35%, Straits Times down by 0.99%  and KLSE Composite down by 0.30%. While, Jakarta Composite up by 0.20%.