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Key indices trim gains as services sector growth eases in May

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Key benchmark indices trimmed intraday gains in mid-morning trade after the latest data showed that the rate of growth in India's services sector eased last month. At 11:15 IST, the barometer index, the S&P BSE Sensex was up 57.79 points or 0.22% at 26,900.93. The Nifty 50 index was currently up 18.85 points or 0.23% at 8,237.80. The Sensex was currently trading below the psychologically important 27,000 level. It had briefly surpassed that level in early trade. The market sentiment was positive after the India Meteorological Department (IMD) in its second stage forecast stuck to its preliminary forecast of good rains for the 2016 southwest monsoon season (June to September).

 

The Sensex rose 51.75 points or 0.19% at the day's low of 26,894.89 in mid-morning trade. The barometer index rose 165 points or 0.61% at the day's high of 27,008.14 in early trade, its highest level since 29 October 2015. The Nifty rose 13.50 points or 0.16% at the day's low of 8,232.45 in mid-morning trade. The index rose 43.05 points or 0.52% at the day's high of 8,262 in early trade, its highest level since 26 October 2015.

The rate of growth in India's services sector eased last month as new business inflows expanded at the slowest rate since July 2015, the outcome of a monthly survey showed. The Nikkei India Services Purchasing Managers' Index (PMI) fell to 51 in May 2016 from 53.7 in April 2016. Output rose in three of the six tracked categories, namely Transport & Storage, Post & Telecommunication and Financial Intermediation. Although some service providers took on additional staff in May 2016, the overall pace of job creation was fractional. Input costs rose again, leading to a further increase in prices charged by service providers. Although service providers remained optimistic that output will expand in the year ahead, the level of confidence was the lowest recorded since February 2016.

In overseas stock markets, Asian stocks edged higher after data overnight showed US private-sector employment gains accelerated in May 2016 and another data showed filings for unemployment benefits in the US declined for a third consecutive week. The US economy is the world's biggest economy. Chinese stocks shrugged off data showing slowdown in growth in China's services sector last month. In mainland China, the Shanghai Composite index was currently up 0.11%. In Hong Kong, the Hang Seng index was currently up 0.38%. The Caixin China services purchasing managers index (PMI) eased to a three-month low of 51.2 in May from 51.8 in April.

US stocks registered modest gains yesterday, 2 June 2016, on signs of steady job gains in the world's biggest economy. Private-sector employment gains accelerated slightly in May 2016 as employers added 173,000 jobs, according to data from Automatic Data Processing Inc.

In Europe, the European Central Bank (ECB) left key interest rates unchanged after a monetary policy review yesterday, 2 June 2016, in line with investors' expectations. ECB President Mario Draghi said that the central bank remains ready to use all the tools within its mandate to make sure that the low-inflation environment doesn't become entrenched. Draghi said that the central bank could push interest rates further into negative territory if needed.

Closer home, the market breadth indicating the overall health of the market was positive. On BSE, 1,172 shares rose and 902 shares declined. A total of 116 shares were unchanged. The BSE Mid-Cap index was currently up 0.27%. The BSE Small-Cap index was currently up 0.23%. Both these indices outperformed the Sensex.

Shares of fertilizer companies edged higher after the India Meteorological Department (IMD) retained its previous forecast of good rains for the 2016 southwest monsoon season (June to September). Rashtriya Chemicals & Fertilizers (up 2.08%), Gujarat Narmada Valley Fertilizers & Chemicals (up 3.69%), Deepak Fertilisers & Petrochemicals Corporation (up 2.67%), Fertilizers & Chemicals Travancore (up 1.48%), Gujarat State Fertilizers & Chemicals (up 2.35%), Chambal Fertilizers & Chemicals (up 1.2%) and National Fertilizers (up 0.3%) rose. Coromandel International (down 0.02%) edged lower. Good rains may boost demand for fertilizers.

Shares of Idea Cellular and Bharti Airtel declined on media reports that Reliance Jio Infocomm (RJIL) has begun selling its Lyf smartphones with SIM cards enabled for the high-speed service in India's bigger cities. Idea Cellular (down 9.42%) and Bharti Airtel (down 1.12%) edged lower. This is the first time regular consumers will get access to the Jio 4G network, following the company opening it up for employees late last year. Reliance Communications was down 3.05%.

Index heavyweight Reliance Industries (RIL) was up 0.26%. RJIL is telecom arm of RIL.

Bharti Infratel was off 0.2%. Bharti Infratel is a telecom tower arm of Bharti Airtel.

TVS Motor Company gained 2.63% at Rs 304.40 after the company announced the launch of its new four stroke moped TVS XL 100 in Himachal Pradesh, Chandigarh, Punjab, New Delhi and Haryana markets yesterday, 2 June 2016. TVS XL is priced at Rs 29,988 ex-showroom in Himachal Pradesh, Rs 30,281 ex-showroom in Chandigarh, Rs 29,808 ex-showroom in Punjab, Rs 30,174 ex-showroom in New Delhi and Rs 29,953 ex-showroom in Haryana. The announcement was made after market hours yesterday, 2 June 2016.

Shriram Transport Finance Company rose 1.19% at Rs 1,171.80 after the company's announcement that it is considering raising of debt funds through various options including issue of secured redeemable non-convertible debentures (NCDs) on private placement basis. Based on the market conditions, the meeting of Banking and Finance Committee will be held during the current month to consider and approve the terms of the borrowings. The announcement was made after market hours yesterday, 2 June 2016.

Meanwhile, India's weather office India Meteorological Department (IMD) in its second stage monsoon forecast issued after trading hours yesterday, 2 June 2016, said that rainfall over the country as a whole for the 2016 southwest monsoon season is most likely to be above normal. Quantitatively, monsoon season rainfall for the country as a whole is likely to be 106% of the long period average (LPA) with a model error of plus/minus 4%. In its first stage forecast issued on 12 April 2016, the IMD had forecast rainfall to be 106% of the LPA with a model error of plus/minus 5%.

In its region wise forecast, the IMD said that the rainfall is likely to be 108% of LPA in North-West India, 113% of LPA in Central India, 113% of LPA in South Peninsula and 94% of LPA in North-East India, all with a model error of plus/minus 8%. The rainfall over the country as whole is likely to be 107% of its LPA during July 2016 and 104% of LPA during August 2016 both with a model error of plus/minus 9%. The quantum of the rainfall and its spatial and temporal distribution are critical for the country's agriculture.

The IMD said that the rapidly declining El Nino conditions became weak in early May 2016 and now have turned to neutral ENSO conditions. Recent changes in the atmospheric conditions over the Pacific also reflect the weakening El Nino conditions. Latest forecast from IMD-IITM coupled model indicates about 50% probability of La Nina conditions to establish during the monsoon season. Most of the other models also suggest development of La Nina conditions during the latter part of the monsoon season. El Nino conditions cause deficient rains in India whereas La Nina conditions trigger abundant rains in the country.

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First Published: Jun 03 2016 | 11:14 AM IST

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