Sensex extends losses

Key benchmark indices extended losses and hit fresh intraday low in early afternoon trade after the result of a survey showed that business activity in the Indian private sector fell in March 2014, after a fractional increase in February 2014. The market breadth, indicating the overall health of the market was negative. The barometer index, the S&P BSE Sensex, was down 121.20 points or 0.54%, off close to 190 points from the day's high and up about 10 points from the day's low.

Among metal shares, JSW Steel hit 52-week high. Sesa Sterlite and Hindustan Zinc gained after global credit rating agency Moody's Investors Service upgraded its outlook for parent company Vedanta Resources Plc to stable from negative. Among auto shares, Eicher Motors scaled record high. L&T dropped on reports that the company is likely to trim its Rs 1.7-lakh crore order book by about 10% when it announces earnings for the year ended 31 March 2014 as lack of approvals, aggressive bidding and other problems have frozen project execution by its customers, mainly in the roads, minerals and metals sectors. Most realty stocks edged higher.

A bout of volatility was witnessed as key benchmark indices reversed gains after hitting fresh record high at the onset of the trading session. The Sensex and the 50-unit CNX Nifty, both, hit fresh record high at the onset of the trading session. The Sensex hovered in negative zone in morning trade. Key benchmark indices extended losses and hit fresh intraday low in mid-morning trade after the result of a survey showed that business activity in the Indian private sector fell in March 2014, after a fractional increase in February 2014. The Sensex further extended losses and hit fresh intraday low in early afternoon trade.

At 12:20 IST, the S&P BSE Sensex was down 121.20 points or 0.54% to 22,430.29. The index fell 132.05 points at the day's low of 22,419.44 in early afternoon trade, its lowest level since 1 April 2014. The index gained 69.16 points at the day's high of 22,620.65 in early trade, a record high for the barometer index.

The CNX Nifty was down 35.90 points or 0.53% to 6,716.65. The index hit a low of 6,711.70 in intraday trade, its lowest level since 1 April 2014. The index hit a high of 6,776.75 in intraday trade, a record high for the index.

The BSE Mid-Cap index was off 22.72 points or 0.32% at 7,176.20. The BSE Small-Cap index was off 16.41 points or 0.23% to 7,203.95. Both these indices outperformed the Sensex.

The market breadth, indicating the overall health of the market was negative. On BSE, 1,329 shares dropped and 1,079 shares rose. A total of 118 shares were unchanged.

Among the 30-share Sensex pack, 23 stocks declined and rest of them rose. Bharat Heavy Electricals (Bhel) (down 2.73%), ONGC (down 1.99%) and State Bank of India (SBI) (down 1.98%) edged lower from the Sensex pack.

JSW Steel rose 2.37% to Rs 1052.75 after hitting 52-week high of Rs 1059 in intraday trade. The company early this week said it has reduced prices for its two steel products -- hot rolled coil and wire rod with effect from 1 April 2014. The quantum of the cut will be Rs 500-750 per tonne for HRC and Rs 500 for Wire rod, the company said after trading hours on Tuesday, 1 April 2014.

Sesa Sterlite rose 1.43% and Hindustan Zinc gained 0.77% after global credit rating agency Moody's Investors Service upgraded its outlook for parent company Vedanta Resources Plc to stable from negative. Moody's said Vedanta has taken steps to improve its credit profile, simplifying its group structure through the formation of Sesa Sterlite - the result of a merger between Sesa Goa and Sterlite Industries - and through its more proactive approach to refinancing debt.

Moody's has a "Ba1" corporate rating on Vedanta and a "Ba3" rating on the miner's senior unsecured debt.

L&T dropped 1.73% on reports that the company is likely to trim its Rs 1.7-lakh crore order book by about 10% when it announces earnings for the year ended 31 March 2014 as lack of approvals, aggressive bidding and other problems have frozen project execution by its customers, mainly in the roads, minerals and metals sectors. Several companies in the infrastructure sector are stranded with projects that have turned unviable due to long delays in securing clearances, regulatory hurdles, policy uncertainty and at times predatory bidding by some companies.

This has cast a shadow on projects in several sectors, including power, coal, highways, mining and metals. In many cases, project execution has not begun or stopped midway while some projects are mired in disputes.

Eicher Motors rose 0.12% to Rs 6,140 after hitting record high of Rs 6,175 in intraday trade.

Most realty stocks edged higher. D B Realty (up 1.91%), Sobha Developers (up 3.1%), and Housing Development & Infrastructure (HDIL) (up 4.79%), gained. But, DLF fell 0.59%.

Unitech rose 4.68%. Unitech today, 3 April 2014, said that Unitech Corporate Parks Plc (UCP) has announced that it has received an approach from a third party expressing interest in potential acquisition of its wholly owned subsidiary Candor Investment and that it is currently in discussions regarding a possible sale of this subsidiary. Unitech also said that along with the approach to UCP, the Unitech Group has also been approached by a third party in relation to a strategic alliance for carrying out the remaining development of the IT SEZs/Parks currently under development along with the potential acquisition of its stake in certain IT SEZs/Parks.

In the foreign exchange market, the rupee edged lower against the dollar on speculation the central bank will slow gains after it strengthened beyond 60 per dollar in late March 2014 for the first time since July 2013. The partially convertible rupee was hovering at 60.115, compared with its close of 59.90/91 on Wednesday, 2 April 2014.

Reserve Bank of India Governor Raghuram Rajan said in a newspaper interview published today, 3 April 2014, that the Indian rupee at 55 to the dollar would be too strong. His comments came after a sharp surge in rupee against the dollar over the past few days. "And today I would say that if we were at 55 (against the dollar), it would be too strong. In the summer of last year, I said 70 (against the dollar) would be too weak," Rajan said in the interview. On Wednesday, 2 April 2014, Rajan had said in an interview to TV channel that the rupee strengthening to 45 or 50 per dollar could hit exports and added saying the RBI was fine with a "certain amount of leeway" in the currency.

Business activity in the Indian private sector fell in March, following a fractional increase in the previous month. Adjusted for seasonal influences, the HSBC India Composite Output Index declined from 50.3 in February to 48.9 in March. Production at manufacturers rose at a weaker rate, whereas service sector output dropped again.

The headline HSBC Services Business Activity Index adjusted for seasonal factors fell from 48.8 in February to 47.5 in March. Registering below the 50 no-change level for the ninth successive month, the latest reading pointed to a moderate drop in activity that was the most pronounced since last December, Markit Economics said today, 3 April 2014. Anecdotal evidence highlighted falling new orders and a difficult economic climate. Sector data signalled lower new business in three of the six categories, namely Financial Intermediation, Renting & Business Activities and Transport & Storage.

New business received by Indian services companies decreased for the ninth month running in March. As was the case for output, the rate of contraction was the quickest in three months. Panellists commented that weaker client demand, partly linked to the forthcoming elections, led to the latest drop in new work intakes, Markit Economics said. New orders placed at manufacturing companies rose at a softer rate. Concurrently, incoming new work in the private sector as a whole decreased, although slightly.

Backlogs of work in the Indian private sector were reported to have increased during March, with both manufacturing and services companies signalling expansion. Service providers linked the latest accumulation in outstanding business to cashflow difficulties and delayed payments from clients, while manufacturers commented onraw material shortages.

March data signalled employment growth in the Indian service sector, but the rate of increase was only slight. Where job creation was reported, this was attributed to forecasts of higher levels of new work in coming months. Payroll numbers in the private sector as a whole rose, although slightly and at a broadly unchanged pace from February.

Inflationary pressures in the Indian private sector softened during March, with both input costs and output prices rising at weaker rates. Additionally, input cost and output price inflation were weak in the context of historical data. Softer increases for charges and costs were registered at both manufacturers and service providers.

Indian service providers were optimistic in March that activity would rise over the next 12 months. Growth of new business, supported by improved economic conditions and new marketing initiatives, is expected to drive the expansion in activity. Confidence strengthened in the latest month and was at its highest since last July.

Commenting on the India Services PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said: "Following some stabilization in recent months, service sector activity weakened again in March led by softer domestic demand. Meanwhile, inflation pressures eased. Looking ahead, growth is expected to remain subdued in coming months, but pick up gradually during the second half of 2014. This, however, assumes that the election outcome provides the elected government with a workable mandate".

The Reserve Bank of India (RBI) next undertakes monetary policy review on 3 June 2014. The RBI left its main lending rate viz. the repo rate unchanged at 8% after a monetary policy review on Tuesday, 1 April 2014.

The next major trigger for the stock market is Q4 March 2014 and year ended 31 March 2014 (FY 2014) corporate earnings. Investors and analysts will closely watch the management commentary that would accompany the results to see if there is any revision in their future earnings forecast of the company for the year ending 31 March 2015 (FY 2015) and/or for the year ending 31 March 2016 (FY 2016). Indian companies will start reporting their Q4 and full year results from mid-April 2014. The result season will conclude in end-May 2014.

A major near term trigger for the stock market is the outcome of the upcoming Lok Sabha elections. Lok Sabha elections will be held between 7 April 2014 and 12 May 2014 in nine phases. The counting of votes will take place on 16 May 2014. The term of the current Lok Sabha expires on June 1 and the new House has to be constituted by May 31. Along with the Lok Sabha election, Andhra Pradesh (AP), including the regions comprising Telangana, Odisha and Sikkim will go to polls to elect new assemblies. AP, Odisha and Sikkim assemblies come to end on June 2, June 7 and May 7 respectively.

Asian stocks edged higher on Thursday, 3 April 2014, after data showed US companies added workers and China outlined economic stimulus plans. Key benchmark indices in Hong Kong, Indonesia, Japan and Singapore were up 0.05% to 0.84%. Key benchmark indices in China South Korea and Taiwan were off 0.18% to 0.96%.

China yesterday, 2 April 2014, outlined a package of measures including railway spending and tax relief to support the economy and create jobs after a slowdown endangered Premier Li Keqiang's target of 7.5% growth this year.

Growth in China's services sector slowed slightly in March, data showed on Thursday, but it is still a bright spot after a string of recent weakening indicators that reinforced fears of an economic slowdown. The official services Purchasing Managers' Index (PMI) released by the National Bureau of Statistics dipped to 54.5 from February's 55, but remained well above the 50 level that is the dividing line between expansion and contraction.

The HSBC China services Purchasing Managers' Index rose to 51.9 in March from 51 in February, HSBC Holdings PLC said on Thursday. A reading above 50 indicates on-month expansion and a reading below that indicates contraction. Despite the stronger reading for services, weakness in the Manufacturing PMI suggests the economy is weakening overall, HSBC chief economist for China Qu Hongbin said in a statement.

Trading in US index futures indicated a flat opening of US stocks on Thursday, 3 April 2014. The US stock market ended a choppy session moderately higher on Wednesday, 2 April 2014, with the S&P 500 closing at a record, as data showing companies added to payrolls last month fueled optimism on growth in the economy.

Private-sector-employment gains picked up in March, with employers adding the most jobs in three months, and quicker hiring may be ahead, Automatic Data Processing Inc. reported Wednesday. ADP said private-sector employers added 191,000 jobs last month, up from 178,000 in February. A prior estimate pegged February's increase at 139,000. Separately, orders for goods produced in US factories rose 1.6% in February, the US Commerce Department said Wednesday. Orders for durable goods--products meant to last at least three years--rose 2.2% in February. Orders for nondurable goods increased 1%.

The influential US non-farms payroll data for March 2014 will be released tomorrow, 4 April 2014.

Two Federal Reserve officials speaking publicly on Wednesday offered slightly different views about the timing of the first rate hike. St. Louis Fed President James Bullard said that he expects the first rate hike to come in the first quarter of 2015, though he conceded that he's ahead of most of his colleagues. Atlanta Fed President Dennis Lockhart said that the first rate hike is not likely to be warranted until at least the last half of next year.

The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 29-30 April 2014. The Federal Reserve on 19 March 2014 said after the conclusion of a monetary policy review that it will trim its monthly bond purchases by $10 billion to $55 billion. The Federal Reserve will end its bond-buying program before the end of the year with an interest-rate increase likely to follow in "around six months," Chair Janet Yellen said on 19 March 2014. Quarterly Fed forecasts on 19 March 2014 showed more officials predicting that the benchmark interest rate, now close to zero, will rise to at least 1% by the end of 2015 and 2.25% a year later.

In Europe, a policy meeting of the Governing Council of the European Central Bank (ECB) will be held today, 3 April 2014, in Frankfurt to decide euro zone interest rates. The ECB is projected to keep interest rates at a record low today. ECB President Mario Draghi has consistently reassured listeners that the euro zone isn't heading for deflation, but that the central bank stands ready to act if needed.

Brazil's central bank on Wednesday, 2 April 2014, raised interest rates for the ninth straight time, prolonging one of the world's longest-running monetary tightening cycles after a surge in food prices stoked already high inflation in an election year. The unanimous decision by the central bank's monetary policy committee raised its benchmark Selic rate by 25 basis points to 11%, its highest level in over two years. Policy makers in their statement removed language used in previous statements that had signaled the probability of additional rate increases.

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