Nifty settles first session of 2017 below 8,200; smallcaps race ahead

Sentiment was hit after factory activity fell below the crucial 50 threshold

In a volatile trading session, the benchmark indices settled the day lower as banking stocks fell on worries their profitability would be hit after most banks reduced lending rates.

Sentiment was also hit after data showed the factory activity fell below the crucial 50 threshold for the first time in 2016

The S&P BSE Sensex settled the day at 26,595, down 31 points, while the broader Nifty50 ended at 8,179, down 6 points. 

Broader market, however, outperformed the headline indices. BSE Smallcap index rose 1.2%, while BSE Midcap added 0.8%. 

The market breadth, indicating the overall health of the market, remained strong. On BSE, 1,919 shares rose and 812 shares fell. A total of 93 shares remained unchanged.

"The New Year has started on a flat note post a smart rally last week. Auto sector was in the limelight given the limited losses in monthly numbers compared to the general consensus. Currently investors are awaiting the kick start of quarter earnings to evaluate the pressure on profitability," said Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services.

"Short term outlook for the market remains negative till Nifty trades below 8,289. We expect targets in the range of 7,715-7,680 in short term," said Devang Shah, independent consultant & advisor.

Buzzing stocks

Realty stocks made smart moves as fall in bank lending rates is expected to boost purchases of both residential and commercial property.

BSE Realty index (up 4%) was the top sectoral gainer, led by gains in Unitech (6.2% to Rs 4) Indiabullls Real Estate (6.3% to Rs 75) and DLF (6.6% to Rs 118). 

Shares of automobile companies on BSE Auto index rallied up to 3% to Rs 1225 after most auto majors reported positive December sales figures. 

Mahindra & Mahindra surged 3% after the company reported 9% increase in total tractor sales at 14,047 units in December. It had sold 12,868 units in the same month last year.

Mahindra & Mahindra surged 3% to Rs 1,225 after the company reported 9% increase in total tractor sales at 14,047 units in December. It had sold 12,868 units in the same month last year.

Eicher Motors also rallied 3% to Rs 22,510, extending its four-session long gains, after the company reported a 42% jump in December motorcycle sales at 57,398 units. It had sold 40,453 units during the same month last year.

Among decliners, SBI declined 2.5% to Rs 243.5 after the largest public sector bank reduced marginal cost of funds based lending rate (MCLR) by 90 basis points (bps) across all maturities.

Bajaj Auto was down 2% to Rs 2,581 after the company announced 22% decline in total sales in December at 225,529 units as against 289,003 units in the same month last year.

Manufacturing PMI contracts in Dec

Hit hard by the demonetisation move, the manufacturing sector contracted in December as new work orders and output took a knock for the first time in 2016, a monthly survey showed today.

The Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI) — an indicator of manufacturing activity — fell to 49.6, down from 52.3 in November.

Global markets

Overseas, European stocks opened lower with a subdued trading activity amid the New Year holiday in London and the New York. Asian markets were shut for public holiday. South Korea's Seoul Composite fell 0.01%, while US stocks fell on Friday as investors took profits on some of 2016s high-flying sectors.

(With inputs from agencies)