Better services PMI supports market to inch higher

Indian markets are continuously gaining traction as the session proceeds, currently trading with good gains, however they have come-off from the highs of the day but the benchmarks are up by over three-fourth of a percent. The good going in the Asian peers have equally supported the markets, though there is still concern about the global economic growth but a positive development on the domestic economic front has improved the optimism of the marketmen. India's services sector grew at its fastest pace in three months during May, HSBC’s services purchasing managers' index, compiled by Markit, rose to 54.7 in May from 52.8 in the previous month. The other comforting factor for the market has been rupee, which traded near its highest in more than a week. On the sectoral front, capital good was leading the pack followed by banking and power, while realty was the only laggard, down by about a quarter percent. The technology gauge too was in cautious mood ahead of the EGoM meet on 2G today.

The BSE Sensex is currently trading at 16,104.69, up by 116.29 points or 0.73%. The index has touched a high 16,125.01 and low 16,023.44 of respectively. There were 21 stocks advancing against 9 declines on the index. The overall market breadth on BSE was in the favor of advances in the ratio of 1371:770, while 103 shares remained unchanged.

The broader indices were trading on a positive note; the BSE Mid-cap index was up by 0.93%, while Small-cap index was up by 0.86%.

The top gaining sectoral indices on the BSE were, CG up by 1.68%, Power up by 1.51%, Bankex up by 1.46%, Metal up by 1.21% and CD up by 1.05% while, Realty down by 0.21% remained the lone loser on the index.

The top gainers on the Sensex were Hindalco up by 2.43, Gail India up by 2.25%, NTPC up by 2.01%, SBI up by 1.99% and BHEL up by 1.86%.

On the flip side, DLF down by 1.26%, Tata Motors down by 1.11%, Tata Power down by 0.72%, Bharti Airtel down by 0.56% and Infosys down by 0.22% remained the top losers on the Sensex.

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 is currently trading at 4,888.00, up by 39.85 points or 0.82%. The index has touched a high and low of 4,893.30 and 4,864.25 respectively. There were 40 stocks advancing against 9 declines while 1 stock remained unchanged on the index.

The top gainers of the Nifty were RInfra up by 3.21%, Hindalco up by 2.64%, Grasim up by 2.41%, SBI up by 2.40% and BHEL up by 2.23%. On the flip side, Ambuja Cement down by 1.39%, DLF down by 1.18%, Tata Motors down by 1.07%, Dr Reddy down by 0.96%, and HCL Tech down by 0.73%, were the major losers on the index.

All the Asian equity indices were trading in the green; Jakarta Composite up 1.92%, Straits Times Index up 0.87%, KOSPI Composite Index up 1.05%, Taiwan Weighted up 1.53%, Nikkei 225 up 1.03%, KLSE Composite up 0.47%, Shanghai Composite up 0.23% and Hang Seng Index up 0.79%.