Sensex squanders a firm start; shut shops with slight gains

Tuesday’s trading session turned out to be a fruitless one for stock markets in India as the benchmark equity indices failed to sustain the gains they amassed in the early part of session. The frontline gauges traded with strong momentum for most part of the day but drifted to lower levels in the last leg of trade to settle with slight gains.

Coming after a day’s consolidation, the benchmark gauges got off to a promising start, tracking sanguine cues, which the Asian markets exhibited. Most markets in the region, which suffered nasty lacerations of over two percent in last session, bounced back as investors turned hopeful ahead of the meetings of Euro-zone policymakers and the wider group of seven (G7) industrialized nations to discuss various measures to avert an onerous financial crisis in the European Union, including greater fiscal integration in the euro zone.

The European markets though, after a positive start, turned mixed with the German equity index falling in to red territory. Earlier in the day, market participants traded with conviction showing across the board buying interest.

After hitting the session’s lows in early morning trades, the frontline gauges managed to capitalize on the momentum and sailed around the psychological 4,900 (Nifty) and 16,100 (Sensex) levels. However, those levels proved to be tough nuts to crack for the key indices, which got weighed down in the second half as the cues from money markets undermined sentiments.

The rupee, Asia’s worst performing currency pared early gains to slip back to hit intraday lows of 55.91 on the back of a sharp fall in the euro and dollar demand from oil firms. Nevertheless, the markets managed to snap second straight session in the positive territory as market participants cheered reports that India's annual monsoon rains have arrived at the southern Kerala coast, brightening the prospects of higher farm output.

Moreover, investors also drew some solace from a HSBC survey, which showed that service sector activity in India staged a strong performance in May as it expanded at the fastest clip in last three months largely because of significant increase in new work orders.

On the BSE sectoral front, the investors resorted to hefty short covering in the Capital Goods counter, which surged around two percent and remained the top gainer in the space. The rate sensitive Bankex index too traded with notable gains of around a percent and provided the much needed support to the benchmarks. On the flipside, the high beta Realty sector along with defensive FMCG pocket got battered by over a percent and capped the upside chances for the markets.

On the global front, cues from the Asian markets remained supportive as sentiments in the region were buttressed by reports indicating that China's services sector grew at its quickest clip for 19 months in May.

On the other hand, the European markets traded on a mixed note amid growing worries over global economy in light of the European financial turmoil, deteriorating US economy and a slowdown in China. Besides, investors are hoping for 25 basis points rate cut by European Central Bank at its rate-setting meeting later in the week while they also await the outcome of the meetings of Euro-zone policymakers and the wider group of seven (G7) industrialized nations.

Back home, the NSE’s 50-share broadly followed index Nifty, garnered over a quarter percent gains to settle above the psychological 4,850 support level while Bombay Stock Exchange’s Sensitive Index - Sensex added thirty two points to finish just above the crucial 16,000 mark. Moreover, the broader markets too pruned most part of their gains in tandem with their larger peers and closed with moderate gains of one third percent.

The markets rose on weaker volumes of over Rs 1.13 lakh crore on the third day of a new F&O series while the turnover for NSE F&O segment also remained on the lower side as compared to that on Monday, at over Rs 0.73 lakh crore. The market breadth remained optimistic as there were 1,406 shares on the gaining side against 1,291 shares on the losing side while 131 shares remained unchanged.

Finally, the BSE Sensex rose 32.24 points or 0.20% to settle at 16,020.64, while the S&P CNX Nifty gained 15.15 points or 0.31% to close at 4,863.30.

The BSE Sensex touched a high and a low of 16,138.29 and 15,979.77 respectively. The BSE Mid cap and Small cap indices rose 0.33% and 0.21% respectively.

L&T up 3.08%, NTPC up 1.98%, SBI up 1.66%, Hindalco up 1.60% and BHEL up 1.47% were the major gainers on the Sensex, while Tata Motors down 3.15%, Bharti Airtel down 2.58%, ITC down 1.89%, DLF down 1.48% and Coal India down 1.09% were the major losers on the index.

On the BSE sectoral space, Capital Goods up 2%, Bankex up 0.82%, Power up 0.80%, Oil & Gas up 0.71% and Healthcare up 0.39%, while Realty down 1.37%, FMCG down 1.09%, Consumer Durables down 0.67%, Metal down 0.27% and Auto down 0.21% were top losers on the BSE sectoral space.

Meanwhile, service sector activity in India showed strong performance in the month of May as it expanded at the fastest clip in last three months largely because of significant increase in new work orders. According to the data compiled by Markit, the HSBC Business Activity Index, which measures the service sector activity in the nation, bounced from 52.8 in April to a three-month high of 54.7 in May. A figure above 50 signals increase in production while, a number below 50 indicates decrease in production.

The resilient performance in the country’s service sector was due to continued rise in new business growth and a strong expansion of new orders. The data also highlighted that though the rate of jobs growth remained marginal, employment in service sector continued to increase. Service providers were more sanguine about one-year outlook, which is evident since the index measuring business expectations zoomed to a 15-month high of 76.7 in May from 73.8 in April, more than 14 points above its March level.

However, inflation remained a cause of concern as input price inflation in the sector climbed to a strong rate while the rise in output prices too was sharp, the highest in four months, and higher than the long-run trend. Nevertheless, the data spurred some respite as it was quite opposite to the government’s recently released fourth quarter gross domestic product (GDP) growth numbers which underscored that Asia's third largest economy expanded at its slowest annual pace in almost nine years.

Moreover, the HSBC Composite Output Index, which encompasses both manufacturing and service sectors’ activity, ascended to 55.3 in May, from 53.8 in the previous month largely because of sharp rise in services PMI and steady manufacturing PMI. Amid increasing speculations that the Reserve Bank of India in its mid-quarter policy review on June 18 would take some policy action to bring India’s deteriorating economy out of doldrums, these PMI numbers emphasize on the fact that there is little room for aggressive monetary policy easing over the near term.

The S&P CNX Nifty touched a high and low 4,898.95 and 4,847.70 respectively.

The top gainers on the Nifty were L&T up 2.94%, Grasim up 2.72%, R Infra up 2.71%, IDFC up 2.57% and Cairn up 2.33%.

On the flipside, Ambuja down 3.29%, Tata Motors down 3.17%, Siemens down 2.64%, Bharti Airtel down 2.31% and ITC down 2.22% were the top losers on the index.

The European markets were trading on a mixed note, as France's CAC 40 advanced 0.45% while Germany's DAX plunged 0.77%.

Stock markets in the United Kingdom remained closed on Tuesday for a national holiday.

Snapping their four day’s losing streak, all the Asian equity indices ended the trade in the positive terrain on Tuesday as investors turned optimistic ahead of the meetings of Euro-zone policymakers and the wider group of seven (G7) industrialized nations. A group of G-7 finance ministers and central bankers will hold a teleconference later on Tuesday to talk about strains in the 17-nation euro-zone, with Spain expected to be a focus of discussion. Moreover, investors are also hoping for 25 basis points rate cut by European Central Bank at its rate-setting meeting later in the week.

Meanwhile, Hang Seng and Nikkei ended the trade with a gain of 0.40% and 1.04% respectively, partly on short-covering ahead of emergency G7 talks on the euro zone debt crisis. Moreover, Chinese Shanghai ended marginal higher on Tuesday, as investors remained cautious after the index posted its biggest percentage fall in six months on Monday due to worries over a slowdown in the domestic economy.