Strong market breadth

Key benchmark indices further extended gains and hit fresh intraday high in early afternoon trade after a manufacturing sector survey showed that production volumes at Indian manufacturers continued to rise in the month just gone by. The barometer index, the S&P BSE Sensex, was up 345.84 points or 1.43%, up close to 295 points from the day's low and off about 25 points from the day's high. The market breadth indicating the overall health of the market was strong, with almost two gainers for every loser on BSE. The BSE Mid-Cap index was up more than 1.7%. The BSE Small-Cap indices was up almost 1.5%. The market sentiment was boosted by data showing that foreign funds made heavy purchases of Indian stocks on Friday, 30 May 2014. Gains in Asian stocks also boosted sentiment on the domestic bourses.

Capital goods stocks edged higher. L&T surged on strong Q4 result. PSU OMCs gained as diesel prices were hiked by 50 paise a litre on Saturday, 31 May 2014. Uflex jumped on strong Q4 result.

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.

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 12:20 IST, the S&P BSE Sensex was up 345.84 points or 1.43% to 24,563.18. The index jumped 367.59 points at the day's high of 24,584.93 in early afternoon trade, its highest level since 28 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 111.50 points or 1.54% to 7,341.45. The index hit a high of 7,342.70 in intraday trade, its highest level since 28 May 2014. The index hit a low of 7,239.50 in intraday trade.

The BSE Mid-Cap index was up 148.89 points or 1.76% at 8,616.11. The BSE Small-Cap index was up 134.19 points or 1.49% at 9,149.92. Both these indices outperformed the Sensex.

The market breadth indicating the overall health of the market was strong, with almost two gainers for every loser on BSE. On BSE, 1,735 shares rose and 885 shares fell. A total of 107 shares were unchanged.

From 30-share Sensex pack, 20 rose and rest fell.

State Bank of India (SBI) (up 3.97%), Axis Bank (up 2.82%) and HDFC (up 2.67%) edged higher from the Sensex pack.

PSU OMCs gained as diesel prices were on Saturday, 31 May 2014, hiked by 50 paise a litre, excluding state levies, the second increase in rates three weeks. The revised prices were effective from Sunday, 1 June 2014. BPCL (up 4.58%), HPCL (up 4.02%) and Indian Oil Corporation (IOC) (up 1.15%) gained.

PSU OMCs suffer revenue loss on domestic sale of diesel, LPG (cooking gas) and kerosene at a controlled price. The government decontrolled pricing of petrol in 2010.

Capital goods stocks edged higher.ABB (India) (up 1.69%), Bharat Heavy Electricals (Bhel) (up 2%), BEML (up 2.7%), Crompton Greaves (up 1.56%), Punj Lloyd (up 3.76%), Siemens (up 4.7%) and Thermax (up 1.41%) gained.

L&T surged 6.34% to Rs 1,646.35 on strong Q4 result. The stock hit record high of Rs 1,650 in intraday trade. The scrip hit low of Rs 1,603 so far during the day. The company's net profit surged 69% to Rs 2723.48 crore on 11% growth in gross revenue to Rs 20229 crore in Q4 March 2014 over Q4 March 2013. The strong growth in bottom-line can be explained by strong operating performance and higher extraordinary income. The result was announced after market hours on Friday, 30 May 2014.

Consequent to completion of demerger of hydro carbon business to wholly owned subsidiary effective from 1 April 2013 in pursuant to approval of said demerger scheme by Bombay High Court vide its order dated 20 December 2013, the numbers of corresponding previous quarter/nine month and FY 2013 figures were restated and the growth figures are in comparison to restated P&L figures

The growth in L&T's top line during Q4 March 2014 was due to progress in various jobs under execution. The international revenue rose 25% to Rs 2966 crore in Q4 March 2014 over Q4 March 2013. International revenue constituted 15% of total revenue in Q4 March 2014.

L&T's order intake during the quarter was steady at Rs 26737 crore. International order inflow during the quarter at Rs 11389 crore constituted 43% of the total order inflow for the quarter.

International revenue rose 22% to Rs 9129 crore in FY 2014 over FY 2013. It constituted 16% of the total revenue in FY 2014.

The company successfully secured fresh orders worth Rs 94108 crore in FY 2014, registering a significant growth 15% YoY, on a large base despite a sluggish economic environment during 2013-14. The international order inflow during the year at Rs 30752 crore grew more than 3 times on a YoY basis, constituting 33% of the total order inflow. Major orders during the year were procured by the infrastructure segment, L&T said in a statement.

The order book at Rs 162952 crore as at 31 March 2014, grew 13% on YoY basis. International order book constituted 21% of the total order book, L&T said in a statement.

With regard to future business outlook, L&T said it has weathered the challenging times of the past few years due to its inherent capabilities and strong balance sheet. Being well positioned to tap the emerging opportunities in its core businesses, the company looks forward to a period of renewed investment momentum and sustainable growth. Given its large order book, the company is optimistic to maintain its growth momentum in the medium term, as domestic and global economic environment improves, L&T said in a statement.

Uflex jumped 15.86% on strong Q4 result. The company's consolidated net profit rose 45.9% to Rs 60.10 crore on 17.5% increase in net sales to Rs 1376.87 crore in Q4 March 2014 over Q4 March 2013. The result was announced after market hours on Friday, 30 May 2014. On a consolidated basis, Uflex's net profit rose 5.9% to Rs 201.64 crore on 13.1% increase in net sales to Rs 5603.34 crore in the year ended March 2014 over the year ended 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 59.165, 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.

Fscal 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.

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 Japan, Singapore and South Korea were up 0.03% to 2.07%. Indonesia's Jakarta Composite was off 0.2%. 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 24 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.

There are expectations that the European Central Bank (ECB) will announce new stimulus measures when the Governing Council of the European Central Bank's (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.

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