Key indices register small gains

Key benchmark indices registered small gains. The barometer index, the S&P BSE Sensex rose 35.73 points or 0.13% at 26,703.69, as per the provisional closing data. The gains for the Nifty 50 index were higher than those for the Sensex in percentage terms. The Nifty rose 19.85 points or 0.24% at 8,179.95, as per the provisional closing data. Data showing acceleration in growth in India's gross domestic product in Q4 March 2016, a sharp pick up in growth in core sector in April 2016 and fiscal deficit meeting the target for fiscal year 2015-16 aided the upmove on the bourses.

The Sensex rose 189.29 points or 0.7% at the day's high of 26,857.25 in morning trade, its highest level since 30 October 2015. The barometer index rose 3.90 points or 0.01% at the day's low of 26,671.86 in early trade. The Nifty rose 55.25 points or 0.67% at the day's high of 8,215.35 in morning trade, its highest level since 27 October 2015. The index rose 10.95 points or 0.13% at the day's low of 8,171.05 in late trade.

On the macro front, the latest data showed that India's gross domestic product (GDP) growth accelerated to 7.9% in Q4 March 2016 compared with a revised reading of a growth of 7.2% in Q3 December 2015. For the fiscal year 2015-16, GDP grew 7.6%, which was higher than 7.2% growth recorded in 2014-15. The government released the GDP data after market hours yesterday, 31 May 2016. Another data released by the government after market hours yesterday, 31 May 2016, showed the output of eight core infrastructure industries carrying 38% of the weight in the Index of Industrial Production (IIP) increased at 18-months high pace of 8.5% in April 2016.

Meanwhile, the finance ministry said that as per the provisional accounts for 2015-16, the fiscal deficit in 2015-16 stands at 3.9% of GDP, meeting the target set by the government. This is a significant improvement over the fiscal deficit of 4.1% in 2014-15 and 4.7% in 2013-14. Revenue deficit has also shown significant improvement due to a sharp increase in capital expenditure of the central government. Revenue deficit improved to 2.5% of GDP in 2015-16 from 2.9% in 2014-15. There was also an increase in the Plan Expenditure in 2015-16 despite substantial increase in share of tax devolution to the States.

Meanwhile, the outcome of a monthly survey today, 1 June 2016, showed slight expansion in growth in India's manufacturing sector in May 2016. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) edged higher to 50.7 in May from 50.5 in April. The rate of growth in output as well as new orders was well below trend. New export orders fell for the first time in 32 months. Sub-sector data highlighted intermediate goods as the best performing category in May, where growth rates for new orders and output were stronger than those seen among consumer goods producers. Investment goods firms, in contrast, saw further declines in new work and production.

Although firms passed on to their clients part of the additional increase in costs by way of raising selling prices, the rate of charge inflation eased to the weakest in the current three-month sequence of increases despite cost inflation climbing to a 14-month high.

In overseas stock markets, European stocks edged lower after the release of mixed manufacturing activity data from China and as a decline in oil prices weighed on sentiment, while investors awaited the release of euro zone manufacturing data due later in the day. Chinese stocks edged lower after the release of the monthly manufacturing and nonmanufacturing data. In mainland China, the Shanghai Composite index settled 0.11% lower. In Hong Kong, the Hang Seng index closed 0.26% lower. An official measure of China's manufacturing sector held steady in May while a private gauge edged down slightly. China's official purchasing managers' index for manufacturing remained at 50.1 last month, the same level as in April and the third consecutive month the index kept above 50, the line separating expansion from contraction. The competing private Caixin manufacturing PMI index slipped to 49.2 in May from 49.4 in April, the fifteenth consecutive month of contraction. Another data showed that China's official nonmanufacturing PMI fell to 53.1 from 53.5 in April.

US stocks ended mostly lower yesterday, 31 May 2016, as investors turned cautious ahead of key economic reports this week for indications on the pace and timing of the next interest rate hike. The Federal Open Market Committee next undertakes monetary policy review on 14-15 June 2016. The Federal Reserve has kept the benchmark fed funds rate unchanged after raising it for the first time in nearly a decade in December 2015.

Closer home, the market breadth indicating the overall health of the market was positive. On BSE, 1,328 shares rose and 1,301 shares declined. A total of 163 shares were unchanged. The BSE Mid-Cap index was provisionally down 0.3%, underperforming the Sensex. The BSE Small-Cap index was provisionally up 0.18%, outperforming the Sensex.

The total turnover on BSE amounted to Rs 2526 crore, lower than turnover of Rs 3866.23 crore registered during the previous trading session.

Telecom stocks edged higher. Reliance Communications (up 4.78%), Bharti Airtel (up 3.28%), Mahanagar Telephone Nigam (up 3.21%), Idea Cellular (up 2.57%) and Tata Teleservices (Maharashtra) (up 0.31%) rose.

Bharti Infratel was up 2.5%. Bharti Infratel is a telecom tower arm of Bharti Airtel.

Index heavyweight and cigarette major ITC rose 2.5% at Rs 360.40. The stock hit a high of Rs 361.45 and a low of Rs 353 in intraday trade.

Index heavyweight Reliance Industries (RIL) declined 0.78% at Rs 951.50 after the company announced that due to lower release of dam water and the significantly increased salinity of water supply to the company's Dahej manufacturing complex in district Bharuch of Gujarat, there is shortage of the right quality of industrial water at Dahej complex. As a response, RIL is running on reduced capacity in some of the plants and has temporarily shut down its PTA and PET plants. RIL has 2.3 MMTPA of PTA capacity and 650 KTPA of PET capacity at its Dahej manufacturing complex. RIL said it has initiated alternative arrangements for water and is closely monitoring the situation. It has also used the current situation to carry out planned maintenance and reliability activities. The company is in a state of readiness to resume full supplies as soon as the water availability and water quality issues are resolved. RIL said it is ensuring a continued supply of PTA to the domestic market from its Hazira and Patalganga manufacturing complexes. The announcement was made after market hours yesterday, 31 May 2016.

Mahindra & Mahindra (M&M) rose 0.77% at Rs 1,334.95 after the company during market hours today, 1 June 2016 said that its total tractor sales rose 20% to 23,018 units in May 2016 over May 2015. Domestic tractor sales rose 21% to 22,148 units in May 2016 over May 2015. Exports declined 14% to 870 units in May 2016 over May 2015.

Commenting on the tractor sales performance, Rajesh Jejurikar, President and Chief Executive Farm Equipment and Two Wheeler Division, M&M said that the company hopes that the positive monsoon forecast, advance estimate of Rabi crop production and the increase in minimum support prices will boost agri income and positively impact the demand going forward.

Separately, M&M during market hours today, 1 June 2016 said its total auto sales rose 11% to 40,656 units in May 2016 over May 2015. Domestic sales rose 10% to 36,613 units in May 2016 over May 2015. Exports rose 21% to 4,043 units in May 2016 over May 2015.

Commenting on the auto sales performance for May 2016, Pravin Shah, President and Chief Executive Officer (Automotive) M&M said that the favourable monsoon projections will definitely lead to improved buyer sentiment that would likely bring a buoyancy in overall demand across all segments of the automotive industry. Going forward, the company expects that the wider product portfolio will drive growth.

Axis Bank dropped amid high volatility. The stock declined 0.62% at Rs 512.40. The stock hit a high of Rs 529.50 and a low of Rs 511.35 in intraday trade. The Reserve Bank of India (RBI) yesterday, 31 May 2016, notified that Foreign Institutional Investors (FIIs)/Registered Foreign Portfolios Investors (RFPIs) can now invest up to 62% of the paid-up capital of Axis Bank, from existing 49% under the Portfolio Investment Scheme (PIS). The central bank further notified that the total foreign investment from all sources i.e. Foreign Institutional Investors (FII)/Registered Foreign Portfolios Investors (RFPIs)/Foreign Direct Investment (FDI)/Non-Resident Indians (NRI)/Persons of Indian Origin (PIO)/American Depository Receipts (ADR)/Global Depository Receipts (GDR) in the bank shall not exceed 62% of paid-up capital. The central bank has stated that Axis Bank has passed resolutions at its board of directors' level and a special resolution by the shareholders, agreeing for enhancing the limit for the purchase of its equity shares and convertible debentures by FIIs/RFPIs. The purchases could be made through primary market and stock exchanges, RBI said.

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