Volatility ruled the roost after a sudden steep slide pushed key benchmark indices into negative zone from positive zone in mid-afternoon trade. The barometer index, the S&P BSE Sensex, fell below the psychological 21,000 mark. The Sensex and the 50-unit CNX Nifty, both, hit their lowest level in almost two weeks as European stocks reversed initial gains as gauges of manufacturing in China declined. The Sensex was down 158.15 points or 0.75%, off close to 350 points from the day's high and up about 55 points from the day's low. The market breadth, indicating the overall health of the market, turned negative from positive in mid-afternoon trade.
Shares of public sector oil refining-cum-marketing companies (PSU OMCs) reversed intraday gains as crude oil prices rose. Index heavyweights, ITC and Reliance Industries, both, declined.
The market edged higher in early trade. The Sensex extended initial gains and hit fresh intraday high in morning trade. Firmness continued on the bourses in mid-morning trade after the result of a survey showed that India's manufacturing sector ended 2013 on an encouraging footing as operating conditions improved for the second successive month in December 2013, as both output and new orders increased. The Sensex trimmed gains in early afternoon trade. The Sensex retained positive zone in afternoon trade. Volatility ruled the roost after a sudden steep slide pushed key benchmark indices into negative zone from positive zone in mid-afternoon trade. The Sensex and the 50-unit CNX Nifty, both, hit their lowest level in almost two weeks as European stocks reversed initial gains as gauges of manufacturing in China declined.
At 14:20 IST, the S&P BSE Sensex was down 158.15 points or 0.75% to 20,982.33. The index fell 214.17 points at the day's low 20,926.31 in mid-afternoon trade, its lowest level since 20 December 2013. The index jumped 190.84 points at the day's high of 21,331.32 in morning trade, its highest level since 9 December 2013.
The CNX Nifty was down 55.40 points or 0.88% to 6,246.35. The index hit a low of 6,233.30 in intraday trade, its lowest level since 20 December 2013. The index hit a high of 6,358.30 in intraday trade, its highest level since 10 December 2013.
The market breadth, indicating the overall health of the market, turned negative from positive in mid-afternoon trade. On BSE, 1,389 shares fell and 1,117 shares rose. A total of 126 shares were unchanged.
Among the 30-share Sensex pack, 18 stocks declined and the rest rose. Bhel (down 2.77%), Tata Power Company (down 2.43%) and L&T (down 2.41%) dropped.
Shares of public sector oil refining-cum-marketing companies (PSU OMCs) reversed intraday gains as crude oil prices rose. HPCL (down 1.52%), BPCL (down 1.69%) and Indian Oil Corporation (down 0.05%) declined. Higher crude oil prices could increase under-recoveries of PSU OMCs at government controlled fuel prices.
Crude oil prices rose after an industry report showed crude inventories fell in the United States, the world's largest oil consumer. Brent crude oil futures for February delivery were up 34 cents or 0.31% at $111.14 a barrel. US crude oil futures for February delivery were up 39 cents or 0.4% at $98.81 a barrel.
The Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas on Wednesday, 1 January 2014, said that the under-recovery on High Speed Diesel (HSD) applicable for first fortnight of January 2014 fell to Rs 9.74 per/litre, from Rs 10.48 per litre during the second fortnight of December 2013.
The under-recovery on PDS Kerosene rose to Rs 37.33 per litre for the month of January 2014, from 36.20/litre for December 2013. The under-recovery on Domestic LPG rose to Rs 762.70 per cylinder for January 2014, from Rs 542.71/cylinder for December 2013. PSU OMCs are now incurring combined daily under-recovery of about Rs 481 crore on the sale of Diesel, PDS Kerosene and Domestic LPG at government controlled prices. This is a higher than the Rs 434-crore daily under-recoveries during the second fortnight of December 2013.
PSU OMCs reported a total of Rs 60907 crore as under-recoveries during first half of 2013-14 on Diesel, PDS Kerosene and Domestic LPG, the Ministry of Petroleum and Natural Gas said.
PSU OMCs reportedly on Wednesday, 1 January 2014, increased the price of aviation turbine fuel (ATF) by 2.7%.
The price of non-subsidised cooking gas (LPG), which customers buy after consuming their quota of subsidised cylinders, was hiked by a steep Rs 220 per bottle on Wednesday on firming international rates. The 14.2-kg cooking gas cylinder that consumers buy beyond their entitled nine bottles at subsidised rates, will now cost Rs 1,241, up from Rs 1,021. This is the third increase in non-subsidised LPG rates in the past month. The price was hiked by Rs 63 a cylinder to Rs 1,017.50 on 1 December 2013.
PSU OMCs suffer under recoveries on domestic sale of diesel, LPG and kerosene at controlled prices. In January 2013, the government allowed PSU OMCs to raise diesel prices in small measures at regular intervals while completely deregulating diesel prices sold to institutional or bulk buyers. The government has already freed pricing of petrol.
Index heavyweight and cigarette major ITC dropped 1.6% to Rs 316.95. The stock hit a high of Rs 325 and low of Rs 315.75 so far during the day.
Index heavyweight Reliance Industries fell 0.75% to Rs 882. The stock hit a high of Rs 895.80 and low of Rs 879.90 so far during the day.
In the foreign exchange market, the rupee reversed initial gains against the dollar and fell below the 62 mark. The partially convertible rupee was hovering at 62.045, weaker than its close of 61.90/91 on Wednesday, 1 January 2014.
Bond prices edged higher. The yield 10-year federal paper, 8.83% GS 2023, was hovering at 8.8145%, lower than its close of 8.8445% on Wednesday, 1 January 2014. Bond yield and bond prices are inversely related.
The Indian manufacturing sector ended 2013 on an encouraging footing, according to a monthly survey from Markit Economics. Operating conditions improved for the second successive month in December, as both output and new orders increased. Consequently, firms raised their workforce numbers further in the latest month.
Down slightly from 51.3 in November to 50.7 in December, the seasonally adjusted HSBC India Manufacturing Purchasing Managers' Index (PMI) signalled a second consecutive monthly improvement in business conditions. Although weaker than its long-run trend, the PMI average for the final quarter of the year at 50.5 was greater than that seen for Q3 at 49.4. Manufacturing production rose for the second month running, but at only a marginal rate. Supporting the latest increase in total output was a further gain in incoming new business. Sector data indicated that the overall expansion in production volumes was largely centred on the consumer goods sub-sector, Markit Economics said.
New orders placed at Indian manufacturers rose in December, albeit marginally. Panelists linked higher levels of new work to improved domestic and overseas demand. However, the latest increase was mainly focused in the consumer goods category. Export order growth was registered for the third consecutive month. Although quickening since November, the overall rate of expansion was modest and below the series average.
Indian manufacturing employment rose in December, stretching the current period of job creation to three months. However, the rate of growth was only marginal. All three broad areas of the goods-producing sector registered higher staffing levels.
Price indicators moved lower in December. Average purchasing costs increased at the slowest pace for four months, but the overall rate of inflation remained robust. Most of the increase was attributed by surveyed companies to higher prices paid for raw materials such as metals, chemicals and textiles. Output prices rose for the seventh month in a row, although competition between manufacturers meant that the rate of increase was historically muted.
December data pointed to a further, albeit fractional, rise in purchasing activity. Consumer goods was the only sub-category of the manufacturing economy to post higher input buying. The overall increase in quantity of purchases was insufficient to prevent a drop in holdings of raw materials. Pre-production inventories fell for the first time since September, but the rate of contraction was moderate. Conversely, stocks of finished goods rose in December. The overall increase was, however, unchanged from the fractional rate seen in November. Backlogs of work rose again during the latest survey period, with the rate of accumulation climbing to a six-month high. Anecdotal evidence highlighted raw material shortages at vendors and power cuts, Markit Economics said.
Commenting on the India Manufacturing PMI survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said: "Manufacturing activity decelerated slightly in December as a slowdown in domestic order flows led to slower output growth. By sector, however, the consumer goods segment held up. Despite the deceleration in order flows, backlogs of work picked up due to raw material shortages and power outages. Inflation gauges were broadly steady, although they declined marginally. Today's numbers show that growth remains moderate and struggles to take off due to lingering structural constraints. Even so, inflation pressures remain firm and are proving sticky. RBI may yet again have to flex its muscles and tighten monetary policy to bring down the elevated level of inflation".
The next major trigger for the market is Q3 December 2013 corporate earnings. The Q3 earnings season will begin around mid-January 2014 and continue till mid-February 2014. Investors and analysts will closely watch the management commentary that would accompany the result to see if there is any revision in their future earnings forecast of the company for the current year and/or the next year.
The Reserve Bank of India's Third Quarter Review of Monetary Policy for 2013-14 is scheduled on 28 January 2014.
European stocks reversed initial gains on Thursday, 2 January 2014, as gauges of manufacturing in China declined. Key benchmark indices in France, Germany and UK were off 0.21% to 0.5%.
Asian stocks edged higher on Thursday, 2 January 2014. Key benchmark indices in Hong Kong, Taiwan, Singapore and Indonesia were up 0.01% to 1.07%. Key benchmark indices in China and South Korea were off 0.31% to 2.2%. Japanese stock markets were closed for holiday.
China's manufacturing purchasing managers' index came in at 51 for December, the National Bureau of Statistics and the nation's logistics federation said yesterday, 1 January 2014. A separate manufacturing PMI report from HSBC Holdings Plc and Markit Economics today showed the gauge coming in at 50.5, from 50.8 in November.
Singapore's economy contracted more than expected in the fourth quarter as manufacturing activity weakened, data showed on Thursday, casting some doubt on market expectations for a slight pick-up in growth over 2014. According to advance estimates from Singapore's Ministry of Trade and Industry, GDP contracted an annualised and seasonally adjusted 2.7% in the final quarter of 2013 from the July-September period. That reversed a 2.2% expansion in the third quarter.
The US stock market was closed on Wednesday, 1 January 2014, for New Year's Day holiday.
The US Federal Reserve said after a two-day monetary policy review on 18 December 2013 that it will cut its monthly bond purchases to $75 billion from $85 billion starting in January 2014 amid an improved outlook for the job market in the world's largest economy. The US central bank is poised to continue winding down its stimulus measures gradually over the next year.
The Federal Open Market Committee (FOMC) holds a two-day monetary policy meeting on 28 and 29 January 2014.
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