Strong market breadth

Key benchmark indices extended losses and hit fresh intraday low in mid-morning trade. The barometer index, the S&P BSE Sensex, was down 68.52 points or 0.28%, off about 135 points from the day's high. The market breadth indicating the overall health of the market was strong, with more than two gainers for every loser on BSE. The BSE Mid-Cap and the BSE Small-Cap indices were up more than 1% each.

IT stocks declined. Glenmark Pharmaceuticals rose after the company's wholly owned subsidiary Glenmark Pharmaceuticals S.A (GPSA) announced the opening of its new cGMP compliant monoclonal antibody manufacturing facility in La Chaux-de-Fonds, Switzerland. Bharat Electronics rose after the company said its order book stood at Rs 23200 crore as on 1 April 2014.

A bout of volatility was witnessed in initial trade as key benchmark indices regained positive terrain after slipping into the red after opening higher. The Sensex and the 50-unit CNX Nifty, both, hit their highest level in more than a week. Key benchmark indices languished in negative terrain in morning trade. The Sensex extended losses and hit fresh intraday low in mid-morning trade.

Foreign institutional investors (FIIs) bought shares worth a net Rs 575.09 crore on Tuesday, 3 June 2014, as per provisional data from the stock exchanges.

At 11:20 IST, the S&P BSE Sensex was down 68.52 points or 0.28% to 24,790.07. The index fell 68.76 points at the day's low of 24,789.83 in mid-morning trade. The index rose 67.31 points at the day's high of 24,925.90 in early trade, its highest level since 26 May 2014.

The CNX Nifty was down 17.15 points or 0.23% to 7,398.70. The index hit a low of 7,393.60 in intraday trade. The index hit a high of 7,433.30 in intraday trade, its highest level since 26 May 2014.

The BSE Mid-Cap index was up 104.52 points or 1.2% to 8,809.58. The BSE Small-Cap index was up 116.87 points or 1.26% to 9,422.74. Both these indices outperformed the Sensex.

The market breadth indicating the overall health of the market was strong, with more than two gainers for every loser on BSE. On BSE, 1,779 shares rose and 791 shares fell. A total of 103 shares were unchanged.

ITC (down 1.27%), Mahindra & Mahindra (M&M) (down 1.4%) and Sesa Sterlite (down 1.17%) edged lower from the Sensex pack.

IT stocks declined. HCL Technologies (down 2.86%), Infosys (down 1.65%), TCS (down 2.19%), Tech Mahindra (down 0.78%) and Wipro (down 1.6%) declined.

Glenmark Pharmaceuticals rose after the company's wholly owned subsidiary Glenmark Pharmaceuticals S.A (GPSA) announced the opening of its new cGMP compliant monoclonal antibody manufacturing facility in La Chaux-de-Fonds, Switzerland. The stock was up 1.15%. The new manufacturing facility in Switzerland supplements Glenmark's existing in-house discovery and development capabilities and will supply material for clinical development, Glenmark Pharmaceuticals said in a statement. The company said its exiting biologics research centre in Switzerland has a robust pipeline of monoclonal antibodies in various stages of development, including bispecific antibodies. .

Bharat Electronics rose 0.46% after the company said its order book stood at Rs 23200 crore as on 1 April 2014. The announcement was made after trading hours on Tuesday, 3 June 2014. Bharat Electronics said it bagged fresh orders worth Rs 4230 crore in the year ended 31 March 2014 (FY 2014). Bharat Electronics said that the company has signed a Memorandum of Understanding for a turnover of Rs 6850 crore during the year ending 31 March 2015 (FY 2015). The company disclosed this information in a presentation to investors.

In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 59.3475, compared with its close of 59.385/395 on Tuesday, 3 June 2014.

Markit Economics said today, 4 June 2014, its seasonally adjusted HSBC India Composite Output index edged up to 50.7 in May from 49.5 in April to 50.7 in May, indicating growth of India's private sector output for the first time in three months. The rate of expansion was, however, slight overall and well below the series average. Higher output was noted at manufacturing and services companies.

The headline HSBC Services Business Activity Index posted 50.2 in May, rising from April's reading of 48.5 and pointing to the first expansion of output in 11 months. That said, the latest increase in activity was only marginal and weak in the context of historical data. Divergent trends were seen at the sub-sector level, with only Post & Telecommunication and Renting & Business Activities registering higher output, Markit Economics said.

Supporting the rise in services activity was a rebound in new orders. The rate of expansion in incoming new work was, however, slight overall. Survey participants commented on a general improvement in client demand, but there were reports that growth was hampered by the elections. Order book volumes placed with manufacturers also rose, leading to higher new business across the private sector as a whole.

Indian service providers were optimistic in May that activity would increase over the next 12 months. Marketing campaigns, the end of the elections and the launch of new services are expected to promote new business growth, and therefore output. Nevertheless, the degree of positive sentiment was unchanged since April.

Input costs faced by service providers in India continued to rise in May. Anecdotal evidence suggested that higher raw material and fuel bills had been the main drivers of increasing input prices. Nonetheless, the rate of cost inflation eased to the weakest since July 2013. Purchase prices at manufacturers rose at the slowest pace in one year. Subsequently, cost inflation across the private sector as a whole dropped to a one-year low.

Prices charged by services companies increased for a forty-third consecutive month in May, with panellists citing the pass-through of higher input costs. However, as with the trend for input prices, the rate of charge inflation moderated to the slowest since last July. Average tariffs set by private sector companies rose at the weakest pace in eight months.

May data indicated that staffing levels in the Indian private sector were broadly unchanged. Workforce numbers increased at manufacturing firms, but stagnated in the service economy.

Work-in-hand at service providers rose for the third month running in May, amid evidence of cashflow difficulties. Furthermore, the rate of accumulation was solid and the joint-strongest in the history of the survey. Backlogs of work across the private sector increased at the sharpest pace since December 2012.

Commenting on the India Services PMI survey, Frederic Neumann, Co-Head of Asian Economic Research at HSBC said: At last, a gradual improvement in services activity, with the index creeping above the 50 level after nearly a year. Fortunately, this momentum will be further supported by the strong election results. However, the RBI is likely to retain its hawkish stance given the increased risks attached to inflation".

The Reserve Bank of India kept its main lending rate viz. the repo rate unchanged at 8% and also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4% of net demand and time liabilities (NDTL) after a monetary policy review on Tuesday, 3 June 2014. The central bank announced reduction in the statutory liquidity ratio (SLR) of scheduled commercial banks by 50 basis points to 22.5% of their NDTL from 23% with effect from the fortnight beginning 14 June 2014.

Reacting to the RBI's latest monetary policy announcement, Finance Minister Arun Jaitley on Tuesday, 3 June 2014, said the RBI has chosen to maintain a balance between growth and inflation while keeping the policy rates unchanged. The RBI has allowed banks to lend more to the private sector since they will be required to subscribe less to government securities than earlier, he said. The RBI has followed a caliberated approach aimed in the direction of balancing between growth and inflation, Jaitley said. The Finance Minister said that it is a priority for the government to maintain a balance between growth and inflation. The government is also concerned with restarting the investment cycle and moving towards higher growth and employment generation. "We would like to address the problem of inflation through supply side measures particularly in relation to food inflation", Jaitley said. Fiscal consolidation is a priority for the government, he said.

Jaitley is expected to table Union Budget for 2014-15 in Lok Sabha by mid-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 fell on Wednesday, 4 June 2014, as investors await a report on US jobs and a decision from the European Central Bank on monetary policy. Key benchmark indices in Indonesia, Singapore, Hong Kong, and China were down 0.3% to 0.94%. Key benchmark indices in Taiwan and Japan rose 0.01% to 0.16%.

Australia's economy grew at the fastest pace in two years as surging exports and home building showed record-low borrowing costs are sustaining a 22-year expansion even as mining investment slows. First-quarter gross domestic product advanced 1.1% from the previous three months, government data today showed.

Trading in US index futures indicated that the Dow could fall 12 points at the opening bell on Wednesday, 4 June 2014. US stocks edged lower on Tuesday, following all-time highs for benchmark indexes on Monday, as investors awaited a European Central Bank decision on stimulus measures and a report on American employment in May.

A Commerce Department report showed US factory orders climbed 0.7% in April.

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.

In Europe, expectations are that the European Central Bank (ECB) will announce new stimulus measures when the Governing Council of the ECB holds a monthly meeting on euro area interest rates tomorrow, 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 tomorrow, 5 June 2014.

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