Metal shares drop after weak Chinese manufacturing data

A sudden slide took key benchmark indices into the red from green in mid-afternoon trade. The market breadth indicating the overall health of the market was negative. The barometer index, the S&P BSE Sensex, was currently off 71.96 points or 0.25% at 28,622.03. World stocks dropped as a Chinese manufacturing gauge dropped and American holiday spending slowed.

Global crude oil prices tumbled. Fall in crude oil prices augur well for India as the country imports 80% of its crude oil requirement. However, the weakness in rupee against the dollar will restrict the benefit of falling global crude oil prices to that extent. A weak rupee raises the cost of imports.

Metal and mining shares fell as a Chinese manufacturing gauge dropped in November 2014. Realty stocks edged lower.

Foreign portfolio investors (FPIs) bought shares worth a net Rs 935.86 crore during the previous trading session on Friday, 28 November 2014, as per provisional data.

On the macro front, the latest data showed India's economic growth eased in Q2 September 2014, mainly due to moderation in the growth of the agricultural and industrial sectors. Meanwhile, the result of a survey today, 1 December 2014, showed that manufacturing operating conditions in India improved for the thirteenth month in a row in November 2014, supported by stronger growth of output and new work intakes.

Earlier, key benchmark indices had trimmed gains amid volatility in early trade. The 50-unit CNX Nifty had trimmed gains after hitting record high.

In overseas markets, Asian and European stocks declined as a Chinese manufacturing gauge dropped and American holiday spending slowed. Trading in US equity index futures indicated a decline in US stocks at the opening bell later in the global day today, 1 December 2014, as a surge in Thanksgiving Day holiday sales failed to carry through the Black Friday weekend.

In the foreign exchange market, the rupee edged lower against the dollar on broad strength in the greenback.

Brent crude oil futures hit five-year low, extending a steep sell-off after the Organization of Petroleum Exporting Countries (OPEC) decided not to cut production last week. Indian government's decision in October 2014 to decontrol diesel prices and a sharp decline in global crude oil prices over the past few months will help reduce the government's fuel subsidy burden and help contain its fiscal deficit. The steep slide in global crude oil prices will also help India in containing its current account deficit and fuel price inflation. India imports 80% of its crude oil requirement. However, a weakness in rupee against the dollar will restrict the benefit of falling global crude oil prices to that extent. A weak rupee raises the cost of imports.

At 14:18 IST, the Sensex was down 71.96 points or 0.25% at 28,622.03. The index lost 73.43 points at the day's low of 28,620.56 in mid-afternoon trade. The index jumped 115.65 points at the day's high of 28,809.64 in early trade.

The Nifty was down 10.65 points or 0.12% at 8,577.60. The index hit a low of 8,570.20 in intraday trade. The index hit a high of 8,623 in intraday trade, a record high for the index.

The market breadth indicating the overall health of the market was negative. On BSE, 1,568 shares declined and 1,211 shares gained. A total of 85 shares were unchanged.

The BSE Mid-Cap index was up 17.79 points or 0.17% at 10,288.40, outperforming the Sensex. The BSE Small-Cap index was off 40.13 points or 0.36% at 11,230.66. The fall the index was higher than Sensex's decline in percentage terms.

Metal and mining shares fell as a Chinese manufacturing gauge dropped in November 2014. China is the world's largest consumer of copper, steel and aluminum. Jindal Steel & Power (down 2.59%), Sesa Sterlite (down 2.33%), NMDC (down 3.11%), National Aluminium Company (down 2.47%), JSW Steel (down 1.38%), Hindalco Industries (down 1.58%), and Hindustan Zinc (down 0.98%) edged lower. Hindustan Copper rose 0.4%.

Tata Steel lost 2.01%. Shares of Tayo Rolls were locked in 20% upper circuit at Rs 80.90. Tayo Rolls during market hours today, 1 December 2014, said that the Committee of the Board of Directors of the company at their meeting held today, 1 December 2014, has allotted 6 lakh 8.50% non-cumulative Redeemable Preference Shares of Rs 100 each to Tata Steel on preferential basis.

Steel Authority of India (Sail) slipped 1.46%. Jaiprakash Associates rose 2.6%. Sail on Friday, 28 November 2014, sold its entire 26% equity shareholding of 3.47 crore equity shares of Rs 10 each in Bokaro Jaypee Cement, a joint venture company of Sail and Jaiprakash Associates to Shri. Rangam Securities & Holdings (SRSHL) at Rs 67.50 per equity share. SRSHL is an indirect wholly-owned subsidiary of Dalmia Cement (Bharat), a subsidiary of Dalmia Bharat. Sail has received a sum of Rs 234.56 crore as consideration for sale of the above shares. In a separate announcement, Jaiprakash Associates said it received a consideration of Rs 667.56 crore from the transaction.

Realty stocks edged lower. Indiabulls Real Estate (down 3.9%), Housing Development and Infrastructure (down 3.77%), Unitech (down 4.37%), Oberoi Realty (down 1.15%) and Sobha (down 1.29%) declined. Godrej Properties rose 1.44%.

DLF rose 0.2% to Rs 149.65. The stock was volatile. The stock hit high of Rs 151.70 and low of Rs 146.80 so far during the day. DLF after trading hours on Friday, 28 November 2014, said that the Supreme Court has passed an order to maintain status-quo with respect to allotment of land to the company in Gurgaon in 2009. DLF had filed a petition before the Supreme Court challenging the judgment dated 3 September 2014 passed by the Punjab and Haryana High Court which disapproved the allotment of land admeasuring 350 acres in Wazirabad village, Gurgaon by the Haryana state government to DLF. The land was allotted to DLF through an international competitive bidding process in the year 2009. The matter will come up for hearing in Supreme Court in due course, DLF said in a statement.

Ashok Leyland gained 2.58% after reporting strong sales in November 2014. The company said during market hours today, 1 December 2014, that its total sales jumped 44% to 7732 units in November 2014 over November 2013. Ashok Leyland said its medium and heavy commercial vehicles (M&HCV) sales jumped 92% to 5,204 units in November 2014 over November 2013. Light commercial vehicles (LCV) sales fell 5% to 2,528 units in November 2014 over November 2013.

In the foreign exchange market, the rupee edged lower against the dollar on broad strength in the greenback. The partially convertible rupee was hovering at 62.0975, compared with its close of 62.035 during the previous trading session on Friday, 28 November 2014.

Brent crude oil futures hit five-year low, extending a steep sell-off after Organization of Petroleum Exporting Countries (OPEC) decided not to cut production last week. Brent for January settlement was off $2.05 a barrel at $68.10 a barrel. The contract hit a low of $67.82 a barrel in intraday trade, the lowest since October 2009. Brent for January settlement had dropped $2.43 a barrel to settle at $70.15 on Friday, 28 November 2014, the lowest close since 25 May 2010.

Meanwhile, United Arab Emirates' Oil Minister Suhail Mohamed Faraj Al-Mazrouei reportedly said that OPEC has no target price it would seek to defend.

Manufacturing operating conditions in India improved for the thirteenth month in a row in November 2014, supported by stronger growth of output and new work intakes, a survey showed today, 1 December 2014. Rising from 51.6 in October 2014 to 53.3 in November 2014, the headline seasonally adjusted HSBC India Purchasing Managers' Index (PMI) - a composite indicator designed to give an accurate overview of manufacturing operating conditions - reached a 21-month peak in November. The latest improvement in business conditions was solid overall and the thirteenth in consecutive months, the survey showed.

Pranjul Bhandari, Chief India Economist at HSBC said that a sharp rise in input prices paid by manufacturers in November 2014 was surprising, but future prints may be lower as falling commodity prices eventually lead to softer intermediate good prices. He also said that the pick-up in output prices charged by manufacturers in November 2014 could partly be signalling some revival in pricing power among businesses. Higher output and an uptick in final prices should convince the Reserve Bank of India to stay on hold at a monetary policy meeting tomorrow, 2 December 2014, Bhandari said.

India's economic growth eased in Q2 September 2014 mainly due to moderation in the growth of the agricultural and industrial sectors, data released by the Central Statistical Office after trading hours on Friday, 28 November 2014, showed. The GDP grew 5.3% in Q2 September 2014, compared with 5.7% expansion in Q1 June 2014. The services sector growth has shown improvement for the second straight quarter in Q2 September 2014. On the demand side, the net foreign demand weakened, while the domestic investment demand growth slowed sharply to remain flat from 7% in Q1 June 2014. However, the domestic private consumption and government consumption growth improved in Q2 September 2014.

GDP growth in the first half of current fiscal year stood at 5.5%, compared with 4.9% expansion during the corresponding period in the previous year. India's GDP grew 4.7% in 2013-14.

The government plans to introduce the nationwide Goods and Service Tax (GST) in April 2016, the Minister of State for Finance, Jayant Sinha, said in written reply to a question in Lok Sabha on Friday, 28 November 2014. The various aspects of GST design are being discussed in the Empowered Committee of State Finance Ministers so that there is broad consensus regarding modalities of its implementation, the government said. GST has been so designed that credit of taxes paid at every stage of value addition from the point of manufacture to the point of consumptions can be availed at the next stage. GST is essentially a tax on value addition and there is seamless transfer of input tax credit across the value chain. Due to the seamless transfer of input tax credit from one stage to another in the chain of value addition, there is an in-built mechanism in the design of GST that would incentivize tax compliance by traders.

According to the government, GST will simplify and harmonise the indirect tax regime in the country. It is expected to reduce cost of production and inflation in the economy, therby making the Indian trade and industry more competitive domestically as well as internationally. It is also expected that introduction of GST will foster a common or seamless Indian market and contribute significantly to the growth of the economy, according to the government.

The government is likely to introduce the constitutional amendment bill for GST during the ongoing winter session of parliament.

Sinha also said in written reply to another question in Lok Sabha on Friday, 28 November 2014, that a series of reforms have been initiated by the government and that many more reforms are on the anvil.

The Indian government intends to get the Insurance Laws Amendment Bill that seeks to enhance FDI limit in capital starved insurance sector passed during the winter session of parliament which began on 24 November 2014. The government is also likely to introduce the constitutional amendment bill for the goods & services tax in the winter session of parliament.

The Reserve Bank of India (RBI) undertakes monetary policy review tomorrow, 2 December 2014. The central bank aims to limit consumer-price gains to 8% by January 2015 and 6% by January 2016. Over the longer term, the RBI aims to limit consumer-price gains to 4%, within a 2% band. The annual rate of inflation based on the combined consumer price index (CPI) for urban and rural India eased to 5.52% in October 2014 from 6.46% in September 2014, data released by the government on 12 November 2014 showed.

European stocks declined today, 1 December 2014, as a Chinese manufacturing gauge fell more than forecast and American holiday spending slowed. Key benchmark indices in UK, France and Germany were off 0.32% to 0.95%.

Asian stocks fell today, 1 December 2014, as a Chinese manufacturing gauge dropped and American holiday spending slowed. Key benchmark indices in Singapore, Taiwan, China, Hong Kong and South Korea were off 0.1% to 2.58%. Key benchmark indices in Indonesia and Japan were up 0.26% to 0.75%.

Global credit rating agency Moody's Investors Service today, 1 December 2014, cut the sovereign-debt rating on Japan to A1 from Aa3, but said the outlook is stable. The ratings cut comes amid increased uncertainty over whether the government can meet its goals for deficit reduction, concerns over medium-term growth prospects and Japan's debt load, Moody's said in the release. While monetary expansion has boosted domestic aggregate demand to some extent, the consumption tax increase on 1 April 2014 has exerted even more powerful downward pressure, the ratings firm said. However, even with the challenges currently facing the government, Japan retains very significant credit strengths, according to Moody's. The announcement came after the close trading hours in Japan.

Japan's economy may have contracted in the third quarter but probably not by as much as surprising preliminary data showed last month, a key survey of business spending suggests. Japanese firms boosted their capital spending by 3.1% in the July to September period from the previous three-month period, the Ministry of Finance's survey of financial statistics of corporations showed today, 1 December 2014.

In China, the HSBC China manufacturing Purchasing Managers' Index, a gauge of nationwide manufacturing activity, fell to a six-month low of 50 in November from 50.4 in October, HSBC Holdings PLC said today, 1 December 2014. A reading below 50 indicates a contraction in manufacturing activity from the previous month, whereas a reading above indicates expansion.

China's official manufacturing Purchasing Managers Index fell to 50.3 in November compared with 50.8 in October, the National Bureau of Statistics, said today, 1 December 2014.

Trading in US index futures indicated that the Dow could fall 95 points at the opening bell today, 1 December 2014. US stocks posted a mixed finish in a holiday-shortened session on Friday, 28 November 2014, as energy shares got slammed a day after the Organization of the Petroleum Exporting Countries (OPEC) did nothing to alleviate a global supply glut. The Dow Jones Industrial Average eked out a gain of 0.49 point to end at 17,828.24, marking another record close.

Consumer spending in the United States fell to $50.9 billion over the four days through 30 November 2014, down from $57.4 billion in 2013, the National Retail Federation said in a statement today, 1 December 2014. It's the second year in a row that sales declined during the period, which had long been famous for long lines and frenzied crowds.

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