Indian equity indices continue to trade weak drifting down as investors took a pessimistic view on reports that the Indian manufacturing sector registered its nine month lowest growth rate in June. Also after vivaciously rallying over 1,250 (Sensex) and 350 (Nifty) points in last six sessions profit booking was seen over the counter. Market participants were seen piling up the positions in Realty, IT and Power while, selling was witnessed among Oil and Gas, Consumer Durables and HealthCare sectors. On reports that a panel of top Indian officials is likely to meet this month to decide on allowing foreign direct investment in multi-brand retail an indication that New Delhi wants to move ahead on a long-delayed reform initiative. Stocks of retail companies like Shoppers Stop, Pantaloon Retail, Rei Six Ten Retail and Trent were up by 0.66%, 3.26%, 4.29% and 1.23% respectively. On the global front Asian markets were trading in green barring Shanghai Composite while the European markets were trading mix on a lackluster note. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 5,600 and 18,700 levels, respectively. The market breadth on the BSE was in favor of advances in the ratio of 1520:1203 while, 147 scrips remained unchanged.
Moreover, on July 30, the Cabinet Committee on Economic Affairs (CCEA) gave the green signal to ONGC and Cairn India, but based on certain pre-conditions. Cairn India will have to pay 20% of revenues as royalty for its 70% share in the ONGC's Bermer fields in Rajasthan. Cairn India will have to withdraw its case of cess arbitration. Cess is the tax surcharge paid by a producer, in this case Cairn India, to the government and Cairn India will have to obtain a No Objection Certificate from ONGC. This means that ONGC should waive its preemptive rights, i.e., let go its right to purchase additional shares in the company before the general public in the event of seasoned offering.
The BSE Sensex is currently trading at 18,758.32 down by 87.55 points or 0.46% after trading as high as 19,031.38 and as low as 18,713.07. There were 14 stocks advancing against 15 declines while 1 stock remained unchanged on the index.
The broader indices were trading on a positive note; the BSE Mid cap and Small cap indices advanced by 0.44% and 0.57% respectively.
On the BSE sectoral space, Realty up 2.77%, IT up 0.76%, Power up 0.38%, Metal up 0.31% and PSU up 0.24% were the major gainers, while Oil and Gas down 1.60%, Consumer Durables down 0.98%, Healthcare down 0.37%, Auto down 0.37% and Bankex down 0.13% were the top losers on the index.
The top gainers on the Sensex were DLF up by 4.04%, Hindalco up by 2.93%, RCOM up by 1.78%, ONGC up 1.68% and Sterlite up 1.28%. On the flip side, RIL down by 3.74%, Bharti Airtel down by 2.47%, Maruti Suzuki down 1.86%, HUL down 1.71% and M&M down 1.31% were the major losers on the index.
Meanwhile, the Indian manufacturing sector registered its nine month lowest growth rate in June, indicating the tight monetary stance taken by the central bank to curb inflation, and raising input cost holding the growth pace of manufacturing sector.
The headline HSBC Markit Purchasing Managers' Index (PMI) based on a survey of around the 500 companies fell to nine month low level to 55.3 in June from 57.5 in May. This fall is steepest fall from September 2010. However, as per the HSBC Markit PMI, new business received by manufacturers in India increased substantially during June, extending the sequence of sustained growth to 27 months. The new export orders also rose firmly however, the rate of growth was slowest since November 2008.
The Indian manufacturing sector output was also affected by the power cut and shortage of labour, the report said labour shortages and power cuts impacted negatively on production. Subsequently, backlogs of work increased for a fifteenth successive month.
The survey also states purchasing activities increased in the sector, however, many companies in manufacturing sector commented that the increased cost of raw materials limiting their purchasing power. The HSBC report said, "Suppliers' delivery times continued to lengthen, with anecdotal evidence suggesting that vendor performance was negatively impacted by higher levels of input buying, alongside shortages of materials, labour and power".
The input prices rise due to increase in prices of raw material, and because of the higher input prices the output prices also increased in the month of June, however, according to the survey the latest increase slowed to the weakest in seven months as pricing power was restricted by strong competition for new business.
Leif Eskesen, Chief Economist for India & ASEAN at HSBC said, "The momentum in the manufacturing sector slowed in June as sequential growth in output and new orders decelerated further. Even with growth easing, tight capacity is still showing up in rising backlogs of work and a lengthening in supplier delivery times."
"On the inflation front, input costs accelerated, while output prices rose less fast. These numbers confirm that tight capacity and monetary tightening is constraining growth. However, inflation pressures are still firmly in place, calling for further policy rate hikes to anchor inflation expectations", he added.
The S&P CNX Nifty is currently trading at 5,626.95, lower by 20.45 points or 0.36% after trading as high as 5,705.80 and as low as 5,609.75. There were 28 stocks advancing against 22 declines on the index.
The top gainers of the Nifty were DLF up by 4.11%, CAIRN up by 3.93%, Hindalco up by 3.46%, IDFC up by 3.09% and RCOM up by 2.09%. On the flip side, RIL down by 3.88%, Ambuja Cement down by 3.55%, Ranbaxy down by 2.88%, Bharti Airtel down by 2.33% and Maruti down 1.91% were the major losers on the index.
Asian markets are exhibiting mixed trends as Hang Seng soared 1.53%, Jakarta Composite jumped 1.08%, Nikkei 225 added 0.53%, Straits Times increased 0.32%, Seoul Composite surged 1.19%, and KLSE Composite up 0.25% and Taiwan Weighted soared 1.01%. On the flipside, Shanghai Composite eased 0.10%.
The European markets were trading in mix note with, France's CAC 40 edged 0.02%, Germany's DAX shed 0.05% and London's FTSE rose 0.08%.
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