Key benchmark indices extended intraday gains in afternoon trade. The barometer index, the S&P BSE Sensex, regained the psychological 20,000 mark, having alternately moved above and below that level in intraday 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, was positive. The Sensex was up 107.98 points or 0.54%, up close to 177 points from the day's low and off close to 25 points from the day's high.
Shares of three public sector oil marketing companies (PSU OMCs) rose as a firm rupee helped eased concerns of high cost of crude oil imports.
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 Sensex fell below the psychological 20,000 mark after regaining that level in morning trade. The market regained positive terrain in early afternoon trade. Key benchmark indices extended intraday gains in afternoon trade. The Sensex regained the 20,000 level.
Indian stocks rose in choppy trade today, 4 October 2013, 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 61.33, compared with its close of 61.735/745 on Thursday, 3 October 2013.
At 13:16 IST, the S&P BSE Sensex was up 107.98 points or 0.54% to 20,010.05. 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 23.40 points or 0.40% to 5,933.10. 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, was positive. On BSE, 1,064 shares rose and 1,062 shares fell. A total of 142 shares were unchanged.
Among the 30-share Sensex pack, 16 stocks rose and rest fell. Tata Motors (up 3.73%), Hindalco Industries (up 2.56%), M&M (up 1.83%), Bharti Airtel (up 1.57%), Coal India (up 1.44%), HDFC Bank (up 1.31%), TCS (up 1.31%) and Sun Pharmaceutical Industries (up 1.13%), edged higher from the Sensex pack.
Jindal Steel & Power (down 1.52%), Dr. Reddy's Laboratories (down 1.43%), GAIL (India) (down 1.11%), Tata Power (down 1.11%), ICICI Bank (down 0.82%), Infosys (down 0.73%), State Bank of India (down 0.66%) and HDFC (down 0.64%), edged lower from the Sensex pack.
Shares of three PSU OMCs rose as rupee firmed up against the dollar. BPCL (up 2.68%), Indian Oil Corporation (up 1.18%) and HPCL (up 0.21%), edged higher. A strong rebound in rupee against the dollar recently has eased concerns of higher cost of crude oil imports. PSU OMCs import about 70-75% of their crude oil needs and rely heavily on foreign currency borrowings, which largely remain unhedged.
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.
European shares were mostly lower in early trade on Friday, 4 October 2013, as the US government shutdown entered its fourth day amid budget wrangling in Washington. Key benchmark indices in Germany and UK were off 0.28% to 0.31%. France's CAC 40 was up 0.08%.
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 0.07% 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 9 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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