Watch out for a close below 6,085 on the Nifty for a change in the trend
A higher than forecast climb in a measure of US manufacturing in February boosted the sentiments in India stock market. Back of the positive performance from the US on Thursday and over all optimism among the Asian indices on Friday made the indices back home zoom up and cover up almost all of the loss of Thursday.
The BSE 30-share Sensex opened at 20,601 while the NSE Nifty opened at 6,108. The day’s low was almost at the same level. The indices hit the intra-day high at near the end of the session at 20,725 and 6,160. The benchmark closed almost at the near the day’s high. Sensex closed at 20,701 (up 164 points or 0.80%) while the Nifty closed at 6,155 (up 64 points or 1.05%). The NSE recorded a volume of 47.10 crore shares.
On the political front, lawmakers passed a bill to create India's 29th state on Thursday despite chaos in the Parliament, as opponents made a futile last attempt to stop the upper house carving landlocked Telangana from coastal Andhra Pradesh. Thursday's vote fulfils a promise made by the government in 2009, and comes just weeks before a national election in April.
The government's allocation of Rs11,200 crore for capital injection into state-run banks is credit negative as it is much smaller than estimated requirements, global credit rating agency Moody's Investors Service said on Thursday.
India should prepare a plan to respond to volatility in global currency markets that may come as the US Federal Reserve reduces monetary stimulus, the International Monetary Fund staff said in a report. While India’s finances have improved since last year, a coordinated plan is needed in case capital account pressures re-emerge, the IMF said. High inflation remains a “central macroeconomic challenge,” and reducing that “will require a tightening of the monetary stance, possibly over a protracted period, which inevitably will weigh on growth prospects,” the IMF said. The IMF estimates Asia’s third-biggest economy will expand 4.6% in the year to March 2014 and 5.4% in the next year.
India is "stuck in a rut" as weaker consumption and stalled investments prevent the economy from building any sort of momentum, HSBC said in a report on Friday adding "slow recovery" could start post elections. HSBC for now is "underweight" on Indian equities but some of its preferred sectors include energy which is likely to gain from subsidy changes, power (stands to benefit from distribution reform), non-ferrous metals (corporate restructuring) and telecoms (more clarity post the auctions).
US Indices closed in the positive on Thursday. US factory activity accelerated in February at its fastest pace in nearly four years.
The Markit Economics preliminary index of US manufacturing increased to 56.7 in February. On the other hand the Labor Department figures indicated fewer applications for unemployment benefits last week.
Except for Shanghai Composite (down 1.17%) all the other Asian indices closed in the positive. Nikkei 225 (up 2.88%) was the top gainer.
Group of 20 finance ministers meet in Sydney this weekend, with US stimulus cuts and political turmoil from Ukraine to Venezuela stoking concern over emerging-market volatility.
German Finance Minister Wolfgang Schaeuble said in a TV interview broadcast today, 21 February 2014, that emerging markets should get their own houses in order before demanding solidarity from other nations. The troubles in emerging markets would be the main topic discussed by finance ministers and central bank chiefs at the G20 summit in Sydney this weekend, Schaeuble said.
Meanwhile, global rating agency Standard & Poor's today, 21 February 2014, cut its long-term foreign currency rating on Ukraine by one notch to CCC, saying the country's worsening political situation is putting the government's capability to service its debt at increasing risk.
European indices were showing a mix performance, while the US Futures were trading higher.
UK retail sales fell more than economists forecast in January, led by a drop in demand at food and clothing stores. Sales including fuel plunged 1.5% from December, when they surged 2.5%, the Office for National Statistics said on Friday in London. The drop is the biggest since April 2012.
Nifty should rise above 6,115 gaining some strength
Thursday’s fall on the Indian bourses wiped off most of the gains of the past two days and brought a halt to the four-day winning streak. The fall followed from the weakness in the Asian indices and weak closing of the US market. Asian stocks declined Thursday as a private survey showed a faster-than-estimated drop in China's manufacturing in February. US indices were pulled down after the minutes from the Federal Reserve's policy setting meeting revealed little consensus about when short-term rates would begin to rise.
The BSE 30-share Sensex opened at 20,661 while the NSE Nifty opened at 6,127. The indices moved in a narrow range. The Sensex moved between 20,522 and 20,663 and closed at 20,537 (down 186 points or 0.90%), while Nifty moved in the range of 6,086 and 6,129 and closed at 6,091 (down 61 points or 1%). NSE recorded a volume of 50.51 crore shares.
The International Monetary Fund, in a staff report prepared for central bankers and finance ministers from the Group of 20, said on Wednesday that significant downside risks remain for the world economy.
US indices closed lower. Federal Reserve policy makers backed away from their year-old commitment to consider raising interest rates when unemployment falls below 6.5%. Minutes of their January meeting showed that several policy makers also said that in "the absence of an appreciable change in the economic outlook, there should be a clear presumption in favour" of continuing to trim the Fed's bond purchases by $10 billion at each meeting.
Atlanta Federal Reserve President Dennis Lockhart said he expects a mid-2015 interest-rate hike.
A larger-than-expected drop in home construction in January also weighed on sentiment. Construction on new US homes tumbled 16% in January to a seasonally adjusted annual rate of 880,000, with drops for single-family homes and apartments, according to Commerce Department.
Except for Jakarta Composite (up 0.12%) all the other Asian indices closed in the red. Nikkei 225 was the top loser (2.15%).
A Chinese manufacturing index fell to the lowest level in seven months in February, adding to challenges for Communist Party officials grappling with risks to the financial system from trust defaults and soured loans. The preliminary February reading of 48.3 for a Purchasing Managers' Index released by HSBC Holdings Plc and Markit Economics compared with January's final figure of 49.5.
Japan's trade deficit widened to a record in January on the back of surging import costs. The 2.79 trillion yen ($27.3 billion) shortfall reported by the Ministry of Finance in Tokyo today. Imports rose 25% from a year earlier and outbound shipments gained 9.5%.
Singapore's economy expanded last quarter after a pick-up in manufacturing at the year end, with the government predicting an improvement in overseas demand in 2014 amid a global recovery. Gross domestic product rose an annualized 6.1% in the three months through December from the previous quarter, when it climbed a revised 0.3%, the trade ministry said in a statement today.
European indices were trading in the red while US Futures were trading marginally lower.
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