Intraday volatility continued as key benchmark indices regained positive terrain in early afternoon trade. Indian stocks edged higher on expectations that the US government's partial shutdown and US political impasse could lead to the US Federal Reserve postponing tapering of monetary stimulus to the US economy. The rupee edged higher against the dollar. The market breadth, indicating the overall health of the market, once again turned positive from negative after earlier turning negative from positive in mid-morning trade. The barometer index, the S&P BSE Sensex, was up 75.48 points or 0.38%, up close to 140 points from the day's low and off close to 55 points from the day's high.
Index heavyweight and cigarette maker ITC reversed intraday losses. Shares of power generation and power distribution companies edged lower. Capital goods pivotals also edged lower. Most metal and mining stocks declined. FMCG major Hindustan Unilever (HUL) extended recent losses triggered by its parent company Unilever Plc issuing a warning early this week that it now expects underlying sales growth of just 3% to 3.5% in the period as against estimates of 6% as a slowdown in its emerging markets accelerated in the July-September quarter.
The market moved into the positive terrain after opening lower. Volatility continued as key benchmark indices recovered after paring initial gains after hitting fresh intraday high in morning trade. The Sensex hit over one-week high. The 50-unit CNX hit 1-1/2-week high. The market slipped into the red and hit fresh intraday low in mid-morning trade after a private survey showed that services activity shrank at the fastest pace in more than four years last month. The barometer index, the S&P BSE Sensex, fell below the psychological 20,000 mark after regaining that level in morning trade. The market regained positive terrain in early afternoon trade.
Indian stocks rose in choppy trade on expectations that the US government's partial shutdown and US political impasse could lead to the US Federal Reserve postponing tapering of monetary stimulus to the US economy. The longer the US federal government remains shut, the bigger the negative impact on US economic growth. Investors are worried that the US political impasse could lead to the US government defaulting on its debt. Failure to raise the debt limit has "the potential to be catastrophic," the US Treasury Department warned in a report on Thursday, 3 October 2013, that said credit markets could freeze and the value of the dollar could plummet. Atlanta Fed President Dennis Lockhart said on Thursday, 3 October 2013, that the shortage of "data would tend to make me somewhat more cautious" about reducing the pace of bond purchases. Less data is not helpful in gauging where the economy is and where it's going, Lockhart said in Atlanta. If the shutdown lingers until the next Fed policy-setting meeting on Oct. 29-30, it would be very hard to make a decision, he said.
The US Federal Reserve is buying $85 billion in Treasury and mortgage debt each month, and has pledged to keep its benchmark interest rate near zero as long as the jobless rate remains above 6.5% and the inflation outlook doesn't exceed 2.5%. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year.
In the foreign exchange market, the rupee strengthened against the dollar tracking global dollar weakness. The partially convertible rupee was hovering at 61.42, compared with its close of 61.735/745 on Thursday, 3 October 2013.
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At 12:20 IST, the S&P BSE Sensex was up 75.48 points or 0.38% to 19,977.55. The index jumped 132.69 points at the day's high of 20,034.76 in morning trade, its highest level since 24 September 2013. The index fell 68.90 points at the day's low of 19,833.17 in mid-morning trade.
The CNX Nifty was up 20.80 points or 0.35% to 5,930.50. The index hit a high of 5,949.15 in intraday trade, its highest level since 23 September 2013. The index hit a low of 5,885 in intraday trade.
The market breadth, indicating the overall health of the market, once again turned positive from negative. On BSE, 1,052 shares rose and 985 shares fell. A total of 119 shares were unchanged. Earlier, the market breadth had turned negative from positive in mid-morning trade.
Among the 30-share Sensex pack, 16 stocks rose and rest fell. Tata Motors (up 4.29%), Hindalco Industries (up 1.73%) and Bharti Airtel (up 1.4%), edged higher.
Index heavyweight and cigarette maker ITC rose 0.55% to Rs 340.90. The stock hit high of Rs 341.90 and low of Rs Rs 335.20 so far during the day.
Shares of power generation and power distribution companies edged lower. GVK Power & Infrastructure, Tata Power Company, NTPC, Adani Power, Power Grid Corporation of India, Reliance Infrastructure, JSW Energy, and Reliance Power shed by 0.56% to 2.33%.
Capital goods pivotals also edged lower. L&T (down 0.77%) and Bhel (down 0.66%), declined.
Most metal and mining stocks declined. Tata Steel (down 0.4%), Sail (down 2.1%), Jindal Steel & Power (down 1.33%), Sesa Sterlite (down 1.46%), NMDC (down 1.17%) and Bhushan Steel (down 0.16%), declined.
FMCG major Hindustan Unilever (HUL) extended recent losses triggered by its parent company Unilever Plc issuing a warning early this week that it now expects underlying sales growth of just 3% to 3.5% in the period as against estimates of 6% as a slowdown in its emerging markets accelerated in the July-September quarter. The stock was off 0.65%.
Unilever attributed the emerging markets slowdown to a significant currency weakening. Unilever said developed markets remained 'flat to down,' representing no change to its previous forecast.
In April-June quarter, Unilever had reported underlying sales growth of 5% with volume growth of 3%, while Hindustan Unilever's (HUL) domestic consumer business grew at 7% with 4% underlying volume growth.
KPIT Technologies rose 1.61% to Rs 135.35. A block deal of 7.97 lakh shares was executed in the counter on BSE at Rs 140 per share at 10:42 IST.
Dewan Housing Finance fell 2.55% to Rs 105.15. A block deal of 5 lakh shares was executed in the counter on BSE at Rs 106 per share at 11:34 IST.
Activity at Indian services companies shrank at the fastest pace in more than four years last month, a survey showed on Friday, 4 October 2013. The HSBC Services Purchasing Managers' Index (PMI), compiled by Markit, slipped from 47.6 in August to 44.6 in September, its weakest since April 2009. That marked its straight third reading below 50, the threshold between growth and contraction. It showed firms were less optimistic about the future and were cutting staff as new business dries up. Services sector accounts for nearly 60% of India's economy. The PMI's new business index fell to 45 in September from 46.6 in August, the weakest reading since February 2009 and the third month running that demand has declined.
An HSBC Markit manufacturing survey released early this week showed that the factory activity shrank for a second month in September.
Asian stocks fell on Friday, 4 October 2013, as concern grew that the US political impasse could lead to the government defaulting on its debt, sparking a recession. Key benchmark indices in Hong Kong, Japan, Singapore, South Korea and Indonesia fell 0.12% to 0.94%. Taiwan's Taiwan Weighted rose 0.07%. Markets in mainland China are closed till 7 October 2013 for National Day holidays.
The Bank of Japan kept its monetary policy unchanged on Friday following its meeting, and said in an accompanying statement that the economy is recovering moderately. In terms of the inflation outlook, the central bank noted that consumer prices excluding fresh food is in the range of 0.5% to 1%, and that inflation expectations appear to be rising on the whole. The Bank of Japan has set a 2% inflation target, which it aims to reach by 2015.
Trading in US index futures indicated that the Dow could gain 12 points at the opening bell on Friday, 4 October 2013. US stocks dropped on Thursday as investors worried that a budget stalemate in Congress would become entangled with much more critical legislation to raise the federal borrowing limit. The standoff between congressional Democrats and Republicans to pass an emergency funding bill, which has led to a third day of a partial US government shutdown, continued with little sign of progress toward a solution.
The failure of US lawmakers to avert a government shutdown fueled concern they won't be able to agree on raising the nation's $16.7 trillion debt limit later this month. The Treasury Department warned that a federal default could lead to a recession as bad as the 2008 financial crisis or worse. "Not only might the economic consequences of default be profound, those consequences, including high interest rates, reduced investment, higher debt payments and slow economic growth could last for more than a generation," the Treasury said in its report. "In the event that a debt limit impasse were to lead to a default, it could have a catastrophic effect on not just financial markets but also on job creation, consumer spending and economic growth -- with many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression," the department said.
A report on Thursday showed fewer Americans than forecast filed applications for unemployment benefits last week. Jobless claims rose to 308,000 in the week ended Sept. 28, from a revised 307,000, the Labor Department said. US payrolls data won't be released as scheduled today because of the government shutdown. The department said that an alternative date for the September payrolls report and jobless rate hasn't been scheduled.
The Federal Open Market Committee (FOMC) holds a two-day policy meeting on 29-30 October 2013. On 18 September 2013, the Fed surprised economists and investors with its decision to delay scaling back its stimulus amid concerns about the strength of the economic recovery.
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