After paring gains in early afternoon trade, key benchmark indices recovered in afternoon trade. At 13:15 IST, the barometer index, the S&P BSE Sensex was up 95.23 points or 0.35% at 26,938.37. The Nifty 50 index was currently up 31.10 points or 0.38% at 8,250.05. 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 above normal rains for the 2016 southwest monsoon season (June to September). Overseas cues were positive.
The market breadth indicating the overall health of the market was positive. On BSE, 1,279 shares rose and 1,146 shares declined. A total of 165 shares were unchanged. The BSE Mid-Cap index was currently up 0.52%. The BSE Small-Cap index was currently up 0.39%. Both these indices outperformed the Sensex.
In overseas stock markets, Asian and European 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. Meanwhile, 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.
Chinese stocks shrugged off data showing slowdown in growth in China's services sector last month. In mainland China, the Shanghai Composite index settled 0.46% higher. In Hong Kong, the Hang Seng index was currently up 0.42%. 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, according to data from Automatic Data Processing Inc. Employers added 173,000 jobs during the month. The private sector employment data comes close on the heels of the influential US government's nonfarms payroll data. The US government will unveil the monthly job data for May 2016 later in the global day. The nonfarms payroll data could provide cues on the timing and pace of further interest rates increases from the US Federal Reserve. The job data has implications for the US monetary policy. The US central bank's mandate centers on maximizing employment and keeping inflation at a 2% target level. The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 14-15 June 2016. The Fed has kept the benchmark fed funds rate unchanged after raising it for the first time in nearly a decade in December 2015.
Chicago Fed President Charles Evans today, 3 June 2016, said in prepared remarks at the Global Interdependence Center in London that the Federal Reserve should avoid aggressive tightening of US interest rates if it doesn't want to upset the so-far-so-good economic apple cart. Evans said it may be appropriate to have two 25 basis point moves between now and the end of the year.
Most cement stocks edged higher. Ambuja Cements (up 1.24%), ACC (up 0.47%) and UltraTech Cement (up 0.17%), edged higher.
Grasim Industries was down 0.26%. Grasim has exposure to cement sector through its holding in UltraTech Cement.
Aviation stocks edged lower as global crude oil prices rose. SpiceJet (down 4.13%), Jet Airways (India) (down 1.23%) and InterGlobe Aviation (down 0.96%) edged higher. Higher crude oil prices adversely affect aviation firms as jet fuel prices, which typically constitute about 50% of airlines' operating costs, are directly linked to international crude oil prices.
Shares of oil exploration and production companies were mixed. Oil India (down 0.54%) and ONGC (down 0.40%) edged lower. Cairn India (up 0.60%) edged higher.
Index heavyweight Reliance Industries rose slightly on media reports its telecom arm Reliance Jio Infocomm (RJIL) has begun selling its Lyf smartphones with SIM cards enabled for the high-speed service in India's bigger cities. The stock was up 0.37%. 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.
Shares of public sector oil marketing companies rose. Indian Oil Corporation (up 1.42%), HPCL (up 2.58%) and BPCL (up 2.68%) edged higher.
Brent for August settlement was currently up 12 cents at $50.16 a barrel. The contract had risen 32 cents or 0.64% to settle at $50.04 a barrel during the previous trading session after a weekly report showed a decline in US crude inventories.
Meanwhile, the outcome of monthly survey showed that 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 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.
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.
IMD also said on 2 June 2016 that the conditions are becoming favorable for onset of southwest monsoon over Kerala during next 4-5 days. The arrival of the rains at the Kerala coast marks the onset of the June-September southwest monsoon season in India. The IMD on 15 May 2016 predicted a delay of 6 days for the onset of the monsoon rains in Kerala this year from the normal onset date which is 1 June.
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