Sensex, Nifty hit highest level in almost a week

A bout of volatility was witnessed as key benchmark indices trimmed gains after hitting fresh intraday high in mid-afternoon. The barometer index, the S&P BSE Sensex, and the 50-unit CNX Nifty trimmed gains after both these indices hit their highest level in almost a week. The Sensex was up 379.08 points or 1.57%, off about 50 points from the day's high and up close to 330 points from the day's low. The market breadth indicating the overall health of the market was strong. The BSE Mid-Cap index was up more than 1.8%. The BSE Small-Cap index was up more than 1.5%. Indian stocks edged higher today after a manufacturing sector survey showed that production volumes at Indian manufacturers continued to rise in the month just gone by. The market sentiment was boosted by data showing that foreign funds made heavy purchases of Indian stocks on Friday, 30 May 2014. Gains in European and Asian stocks also boosted sentiment on the domestic bourses.

Most realty stocks gained. Indusind Bank gained after the bank said it has launched a new customer-centric service titled Video Branch.

Key benchmark indices edged higher amid initial volatility. Key benchmark indices retained positive zone in morning trade. The Sensex extended gains and hit fresh intraday high in mid-morning trade after a manufacturing sector survey showed that production volumes at Indian manufacturers continued to rise in the month just gone by. Key benchmark indices further extended gains and hit fresh intraday high in early afternoon trade. Key benchmark indices extended gains in afternoon trade. The Sensex and the 50-unit CNX Nifth, both, hit their highest level in almost a week. Firmness continued on the bourses in mid-afternoon.

The market sentiment was boosted by data showing that foreign funds made heavy purchases of Indian stocks on Friday, 30 May 2014. Foreign institutional investors (FIIs) bought shares worth a net Rs 2977.62 crore on Friday, 30 May 2014, as per provisional data from the stock exchanges.

At 14:20 IST, the S&P BSE Sensex was up 379.08 points or 1.57% to 24,596.42. The index jumped 428.74 points at the day's high of 24,646.08 in afternoon trade, its highest level since 27 May 2014. The index gained 52.86 points at the day's low of 24,270.20 in early trade.

The CNX Nifty was up 114.15 points or 1.58% to 7,344.10. The index hit a high of 7,355.40 in intraday trade, its highest level since 27 May 2014. The index hit a low of 7,239.50 in intraday trade.

The BSE Mid-Cap index was up 158.52 points or 1.87% at 8,613.14, outperforming the Sensex. The BSE Small-Cap index was up 136.46 points or 1.51% at 9,152.19, underperforming the Sensex.

The market breadth indicating the overall health of the market was strong. On BSE, 1,861 shares rose and 1,027 shares fell. A total of 95 shares were unchanged.

From 30-share Sensex pack, 23 rose and rest fell. ONGC (up 3.86%), State Bank of India (SBI) (up 3.54%) and HDFC (up 3.07%) edged higher from the Sensex pack.

IndusInd Bank rose 2.39%. The bank during market hours today, 2 June 2014, said it has launched a new customer-centric service titled Video Branch. This innovative offering (first-of-its-kind initiative in the banking industry) enables the customers to do a video conference with the bank staff in order to avail various services offered by bank.

Most realty stocks gained. Unitech (up 3.06%), D B Realty (up 2.79%), Housing Development & Infrastructure (up 3.86%) and Sobha Developers (up 1.27%) gained. DLF fell 0.29%.

Coal India gained 1.05%. The company said during market hours today, 2 June 2014, that the coal production of the company and its subsidiaries was 94% of the targeted production at 36.27 million tonnes in May 2014. The coal offtake of the company and its subsidiaries was 93% of targeted offtake at 40.71 million tonnes in May 2104.

Coal production during April-May 2014 was 97% of the targeted production at 73.79 lakh tonnes. The growth in coal production was 5% year-on-year during April-May 2014. Coal offtake during April-May 2014 was 91% of the targeted offtake at 81.25 lakh tonnes. The growth in coal offtake was 4% year-on-year during April-May 2014.

Easun Reyrolle lost 5% after the company reported a net loss of Rs 16.08 crore in Q4 March 2014 as against net profit of Rs 12.46 crore in Q4 March 2013. The result was announced on Saturday, 31 May 2014. Easun Reyrolle's total income from operations declined 36.28% to Rs 36.83 crore in Q4 March 2014 over Q4 March 2013.

Shalimar Paints tumbled 7.52% after the company reported a consolidated net loss of Rs 10.29 crore in Q4 March 2014 as against net profit of Rs 0.37 crore in Q4 March 2013. The Q4 result was announced after market hours on Friday, 30 May 2014. Shalimar Paints' total income from operations declined 8.77% to Rs 128.23 crore in Q4 March 2014 over Q4 March 2013.

In the foreign exchange market, the rupee edged lower against the dollar as data signaling an improvement in the US economy boosted the dollar. The partially convertible rupee was hovering at 59.155, compared with its close of 59.10/11 on Friday, 30 May 2014.

Markit Economics today, 2 June 2014, said that the HSBC India Manufacturing PMI for May 2014 indicated that production volumes at Indian manufacturers continued to rise. Growth of both total new orders and new export business accelerated over the month, leading to further job creation across the sector, Markit Economics said. Up marginally from 51.3 in April to 51.4 in May, the seasonally adjusted HSBC India Purchasing Managers' Index (PMI) pointed to a slight improvement in operating conditions and one that was weaker than the series average, Markit Economics said. Output rose for the seventh consecutive month in May. That said, the rate of expansion was unchanged from the modest pace registered in April. Panellists highlighted stronger increases in new orders, although there were mentions that growth was stymied by power cuts and the elections. The latest rise in production was broad-based by sector, with the sharpest expansion signalled by consumer goods producers.

May data highlighted further rises in incoming new work, marking a seven-month sequence of expansion. Moreover, the pace of increase accelerated to the quickest since February. Those survey respondents reporting higher new orders commented on the signing of new contracts and improved demand from both domestic and foreign clients. Growth of order book volumes was registered across the three broad areas of the manufacturing economy, led by consumer goods producers.

New orders from abroad also increased during May, thereby stretching the current period of expansion to eight months. New export business rose at a solid rate that was quicker than in April. Surveyed firms reported having benefited from favourable exchange rates. Overseas demand improved in two of the three sub-categories, the exception being investment goods.

Staffing levels were raised in May, amid evidence of increased production requirements. Employment growth has maintained a broadly steady trend pace in the current eight-month expansionary sequence. All three monitored sub-sectors registered higher workforce numbers.

Indian manufacturers indicated that purchasing activity increased further in May. Where input buying rose, this was associated with new order growth. Nonetheless, the rate of expansion was only slight and moderated since the previous month. Growth of quantity of purchases was noted across the three market groups.

Input costs continued to rise in May, albeit at the weakest rate in one year. There were reports of higher prices paid for some raw materials, although a number of panellists reported successful price negotiations with suppliers. Concurrently, output charges increased further. The rate of charge inflation was, however, marginal and weaker than the series average.

While stocks of purchases were broadly unchanged, post -production inventories increased in May. Meanwhile, outstanding business rose further during the latest month, with monitored firms reporting power outages.

Commenting on the India Manufacturing PMI survey, Frederic Neumann, Co-Head of Asian Economic Research at HSBC said: "The momentum in the manufacturing sector improved at the margin, thanks to higher domestic and export order flows. However, output growth held steady as frequent power cuts forced firms to accumulate backlogs at a faster pace. Encouragingly, input price pressures eased further, but with output prices still rising the RBI cannot take down its inflation guards".

India's gross domestic product (GDP) rose at steady pace of 4.6% in Q4 March 2014 same as in the previous quarter. The GDP growth rose to 4.7% in the fiscal year ended 31 March 2014 (FY 2014) from 4.5% in FY 2013, but remained below the advances estimate of 4.9% released in February 2014. The 'agriculture, forestry and fishing' sector has shown a growth rate of 4.7% in FY 2014, as against the growth rate of 4.6% in the Advance Estimates.

Fiscal deficit has declined to 4.5% of GDP in FY 2014 against 4.8% of budget estimates in February 2014 and 4.6% of revised estimates in February 2014. The fiscal deficit has also declined from 4.9% of GDP in FY 2013.

The Prime Minister's Office (PMO) on Saturday, 31 May 2014, announced that Prime Minister Narendra Modi has decided to abolish all the existing nine Empowered Group of Ministers (EGoMs) and twenty-one Groups of Ministers (GoMs). This would expedite the process of decision making and usher in greater accountability in the system, the PMO said in a statement. The Ministries and Departments will now process the issues pending before the EGoMs and GoMs and take appropriate decisions at the level of Ministries and Departments itself, the PMO said. Wherever the Ministries face any difficulties, the Cabinet Secretariat and the Prime Minister's Office will facilitate the decision making process, the PMO said.

Finance minister Arun Jaitley vowed on Sunday, 1 June 2014, to uphold fiscal discipline, despite pressure on public finances from figures showing the economy grew by less than 5% in the fiscal year just ended. In a post on his Facebook page, Jaitley said pulling India out of its current economic malaise would involve fiscal rectitude as a combination of monetary and fiscal policy. Slower GDP growth will imply lower tax buoyancy and a higher fiscal deficit, Jaitley said. "We must move towards an era of fiscal discipline where we can reduce the fiscal deficit, contain inflation and improve upon our growth rates", Jaitley said. Jaitley did not name any deficit numbers, but said he would target fiscal discipline in the near term so as to maximise India's growth potential over the longer run. "We must commit ourselves to this discipline. Short term disciplining till we reverse the present trend will give us long term benefits," he wrote.

The Reserve Bank of India (RBI) is widely expected to keep its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review tomorrow, 3 June 2014, as the central bank waits for further proof that inflation is under control. While high inflation rates have come down in recent months, the central bank is waiting to see if they will flare up again. The RBI has said it wants the consumer price index inflation rate to cool to 8% by January and further to 6% a year after that. The central bank will want to see if the crucial monsoon rains this year will exacerbate or ease food price inflation. The RBI left 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.

Jaitley is expected to table Union Budget for 2014-15 in Lok Sabha by July 2014. An interim budget was presented by P. Chidambaram in February this year. Essentially, in the nature of a vote on account, the interim budget was intended to get Parliament approval for expenditure to be incurred during the first few months of fiscal year 2014-15 due to Lok Sabha elections.

European shares edged higher on Monday, 2 June 2014, as a report showed that Chinese manufacturing expanded at the fastest pace since December. Key benchmark indices in Germany and UK were up by 0.32% to 0.36%. However, France's CAC 40 was off 0.03%.

There are expectations that the European Central Bank (ECB) will announce new stimulus measures when the Governing Council of the ECB holds a monthly meeting on euro area interest rates on Thursday, 5 June 2014.

Bank of England's Monetary Policy Committee will probably keep its benchmark interest rate at a record-low 0.5% and leave its bond-purchase program unchanged at a monthly meeting on interest rates in UK on Thursday, 5 June 2014.

Asian stocks advanced on Monday, 2 June 2014, after a gauge of China's manufacturing expanded at the fastest pace this year in May. Key benchmark indices in Indonesia, Japan, Singapore and South Korea were up 0.13% to 2.07%. Stock markets in China, Hong Kong and New Zealand were closed for holiday.

China's Purchasing Managers' Index increased to 50.8 in May, the National Bureau of Statistics and China Federation of Logistics and Purchasing said on Sunday, while authorities reduced some lenders' reserve requirement ratios as the government acts to support growth in the world's second-biggest economy.

Trading in US index futures indicated that the Dow Jones Industries Average could gain 23 points at the opening bell on Monday, 2 June 2014. The Dow and the S&P 500 eked out small gains on Friday, 30 May 2014. The Nasdaq Composite Index registered small losses. On the economic front, the Commerce Department reported US consumer spending fell 0.1% in April from a month earlier. April personal income rose 0.3%. The price index for personal consumption expenditureswhich is the Federal Reserve's preferred gauge of inflationrose 0.2% in April. The Thomson Reuters and University of Michigan's consumer-sentiment index for May showed a final reading of 81.9, up from a preliminary 81.8.

The influential US nonfarm payroll data for May 2014 is due for release on Friday, 6 June 2014.

The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 17-18 June 2014. The Fed on 30 April 2014 said after a monetary policy review that it will keep the benchmark interest-rate target at almost zero for a "considerable time" after its bond-buying program ends. The FOMC also reduced monthly debt purchases to $45 billion, its fourth straight $10 billion cut, and said further reductions are likely in "measured steps" if the economy continues to improve.

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