Market continues to trade higher

Key benchmark indices firmed up after hitting fresh intraday low in afternoon trade. The barometer index, the S&P BSE Sensex, was up 74.92 points or 0.33%, up about 24 points from the day's low and off about 83 points from the day's high. The market breadth, indicating the overall health of the market, was positive. Indian stocks rose today, 6 May 2014, tracking higher European and Asian stocks and after firm finish for US stocks overnight.

The market edged higher in early trade. The Sensex an d the 50-unit CNX Nifty, both, hit their highest level in almost one week. It held firm in morning trade. It trimmed intraday gains in mid-morning trade. It hovered in positive terrain in early afternoon trade. Key benchmark indices firmed up after hitting fresh intraday low in afternoon trade.

Asian stocks shuffled higher on Tuesday after promising US economic news helped Wall Street to a firmer finish.

The market sentiment was boosted by data showing that foreign funds remained net buyers of Indian stocks on Monday, 5 May 2014. Foreign institutional investors (FIIs) bought shares worth a net Rs 279.86 crore on Monday, 5 May 2014, as per provisional data from the stock exchanges.

At 13:15 IST, the S&P BSE Sensex was up 74.92 points or 0.33% to 22,520.04. The index rose 157.59 points at the day's high of 22,602.71 in early trade, its highest level since 30 April 2014. The index gained 51.10 points at the day's low of 22,496.22 in afternoon trade.

The CNX Nifty was up 16.35 points or 0.24% to 6,715.70. The index hit a high of 6,743.45 in intraday trade, its highest level since 30 April 2014. The index hit a low of 6,709.50 in intraday trade.

The BSE Mid-Cap index rose 29.72 points or 0.40% to 7,377.78. The BSE Small-Cap index rose 31.33 points or 0.42% to 7,529.42. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market, was positive. On BSE, 1,230 shares gained and 1,216 shares fell. A total of 125 shares were unchanged.

Among the 30-share Sensex pack, 15 stocks gained and rest of them fell. ICICI Bank (up 1.54%), ITC (up 1.45%), Reliance Industries (up 1.43%), ONGC (up 1.28%), Tata Steel (up 1.26%), Larsen & Toubro (up 0.97%), Tata Motors (up 0.94%) and Bhel (up 0.78%), edged higher from the Sensex.

Bharti Airtel (down 1.67%), Hindalco Industries (down 1.23%), Wipro (down 1.07%), Bajaj Auto (down 0.88%), TCS (down 0.88%), Hero MotoCorp (down 0.81%), HDFC (down 0.64%), Infosys (down 0.44%), Sun Pharmaceutical Industries (down 0.36%) and Hindustan Unilever (down 0.31%), edged lower from the Sensex.

Electrosteel Steels fell 6.33% to Rs 3.85 after the company reported a net loss of Rs 113.82 crore in Q4 March 2014, lower than net loss of Rs 121.87 crore in Q4 March 2013. Net sales rose 21.6% to Rs 88.46 crore in Q4 March 2014 over Q4 March 2013. The Q4 result was announced after market hours on Monday, 5 May 2014.

Pipavav Defence and Offshore Engineering Company jumped 3.82% to Rs 44.80 on bargain hunting the stock tumbled 14.13% in the preceding three trading sessions to Rs 43.15 on 5 May 2014, from a recent high of Rs 50.25 on 29 April 2014.

In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 60.1450, compared with its close of 60.22 on Monday, 5 May 2014.

April data indicated that business activity across the Indian private sector fell again Markit Economics said today, 6 May 2014. The seasonally adjusted HSBC India Composite Output Index rose from 48.9 in March to 49.5. Despite being consistent with a marginal rate of reduction, this was the second consecutive sub-50.0 reading recorded. Manufacturing production increased at a softer rate in April, whereas service sector output decreased further.

Up from 47.5 in March to 48.5 in April, the headline HSBC Business Activity Index adjusted for seasonal factors indicated a slower contraction of output in the Indian service sector. Nevertheless, the latest reduction was the tenth in as many months. According to survey participants, a difficult economic climate, combined with the elections and a further drop in new orders had all contributed to the latest fall in business activity. Output decreased in two of the six monitored service categories, these being Financial Intermediation and Transport & Storage.

Incoming new work at service providers dropped at a softer rate in April, and one that was modest overall. Panellists reporting lower new business linked this to weaker demand and the elections. Conversely, new orders received by manufacturers increased. Private sector companies registered lower new business for the second month running, although the rate of reduction eased to a marginal pace.

Indian services companies indicated that payroll numbers fell in April, amid evidence of lower new business inflows. Despite being fractional, the latest drop in staffing levels ended a four-month sequence of job creation. Workforce numbers in the private sector as a whole were broadly unchanged.

Input prices faced by Indian services firms continued to rise in April, with panellists reporting higher prices paid for food, packaging materials, fuel and paper. Although solid, the rate of inflation was weaker than the series long-run average. Input price inflation in the manufacturing economy moderated. Subsequently, the rise in input costs across the private sector as a whole softened to the slowest since last June.

Output charge inflation at service providers accelerated to the strongest in five months during April, as companies attempted to protect margins amid increased cost burdens. That said, the index measuring output prices registered below its long-run trend. Average tariffs across the private sector as a whole also rose, with inflation being the strongest in five months.

Unfinished business in the Indian service sector rose for the second month in succession during April, with firms reporting delayed payments from clients. Nonetheless, the rate of backlog accumulation was modest and little-changed since March. Work-in-hand in the private sector rose for the second month running.

Business sentiment in the service sector remained positive in April, with survey respondents indicating that a combination of planned increases in marketing budgets, the launch of new services and forecasts of stronger demand are all expected to result in output growth over the course of the next year. There were also mentions that economic conditions are anticipated to improve after the elections.

Commenting on the India Services PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said : While the Business Activity Index improved, it remained below the water line. This points to still subdued service sector activity. Meanwhile, the slight uptick in inflation readings suggests that inflation pressures are still lingering, which calls for the RBI to continue its starring contest with inflation.

The Reserve Bank of India (RBI) next undertakes monetary policy review on 3 June 2014. The RBI left its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review on 1 April 2014, as consumer-price inflation eased to a two-year low and as the rupee firmed up against the dollar.

A major near term trigger for the stock market is the outcome of the upcoming Lok Sabha elections. The 36 days long voting process began on 7 April 2014 and will conclude on 12 May 2014. The results will be declared on 16 May 2014 after which India will get a new government. The term of the current Lok Sabha expires on 1 June and the new House has to be constituted by 31 May.

European stocks edged higher in early trade on Tuesday, reversing the previous session's dip and tracking gains on Wall Street following robust US macro data. Key benchmark indices in UK, France and Germany were up by 0.01% 0.36%.

In Europe, a monthly meeting of the Monetary Policy Committee of the Bank of England's (BoE) for monetary policy review is scheduled on Thursday, 8 May 2014.

The European Central Bank (ECB) will hold monetary policy meeting on Thursday, 8 May 2014, in Brussels, Belgium.

Asian stocks were mostly higher on Tuesday, with trading volume curbed by holidays in Japan, Hong Kong and South Korea. Key benchmark indices in China, Singapore, and Taiwan were up 0.03% to 0.47%. Indonesia's Jakarta Composite was down 0.11%.

Australia's central bank left its benchmark interest rate unchanged at a record low as tame consumer prices and anticipated cuts to government spending give policy makers room to spur employment-intensive industries. Governor Glenn Stevens and his board kept the overnight cash-rate target at 2.5% as predicted.

Trading in US index futures indicated that the Dow could gain 31 points at the opening bell on Tuesday, 6 May 2014. US stocks edged higher on Monday on the back of positive economic data. The Institute for Supply Management's US services sector index rose to 55.2 in April, the fastest pace in eight months and easily topping forecasts. A reading above 50 indicates expansion. The data added to evidence that the US economy is emerging from a particularly harsh winter-induced slowdown and provided a welcome offset to worries about China.

Federal Reserve Chair Janet Yellen is due to testify to lawmakers tomorrow, 7 May 2014 after the US central bank pressed ahead April 30 with reductions to its monthly bond-buying, while holding its short-term interest-rate target at near zero.

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