RESISTANCE

Stock markets in India traded on a sanguine note in Tuesday afternoon trades as the benchmark equity indices traded with around a percent gains in early afternoon trades. After hitting the session's lows in early morning trades, the frontline gauges managed to capitalize on the momentum and sailed around the psychological 4,900 (Nifty) and 16,100 (Sensex) levels. However, those levels are proving to be tough nuts to crack for the key indices which have come off the day's highs. Nevertheless, the markets have extended their recovery from yesterday tracking the recovery in equity markets across the Asian region. Most markets in the region, which suffered nasty lacerations of over two percent in last session, bounced back as investors turned hopeful ahead of the meetings of Euro-zone policymakers and the wider group of seven (G7) industrialized nations to discuss various measures to avert an onerous financial crisis in the European Union, including greater fiscal integration in the euro zone. The European markets though, after a positive start, have turned mixed with the German equity index falling in to red territory.

Back home, market participants cheered reports that India's annual monsoon rains have arrived at the southern Kerala coast, brightening the prospects of higher farm output. Moreover, a HSBC survey showed that service sector activity in India staged a strong performance in May as it expanded at the fastest clip in last three months largely because of significant increase in new work orders. Investors also drew some solace after Indian rupee showed signs of recovery and registered a one-week high of 55.38 per dollar. On the BSE sectoral front, the investors reported to hefty short covering in the Capital Goods counter which surged around two percent and remained the top gainer in the space. The rate sensitive Bankex index too traded with notable gains of around one and half a percent and provided the much needed support to the benchmarks. Though largely across the board buying was evident, investors exerted some selling pressure on the defensive FMCG sector which traded with losses of around one third of a percent.

Moreover, the broader markets continued to trade on a positive note with notable gains of around a percent, performing in tandem with their larger peers. The bourses expectedly climbed on weak volumes of over Rs 0.5 lakh crore on the third day of a new F&O series while the market breadth on BSE was in favor of advances in the ratio of 1415:937 while 114 scrips remained unchanged.

The BSE Sensex is currently trading at 16,104.78 up by 116.38 points or 0.73% after trading as high as 16,138.29 and as low as 16,023.44. There were 22 stocks advancing against 8 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index climbed 0.86% and Small cap index advanced 0.70%.

On the BSE sectoral space, Capital Goods up 1.87%, Bankex up 1.54%, Power up 1.34%, Metal up 1.21% and Consumer Durables up 1.01% were the major gainers, while FMCG down 0.31% was the only laggard in the space.

SBI up 2.68%, Hindalco up 2.52%, L&T up 2.27%, Sterlite up 2.02% and NTPC up 2.01% were the major gainers on the Sensex, while DLF down 1.51%, Tata Motors down 1.51%, Bharti Airtel down 0.83%, HUL down 0.69% and ITC down 0.61% were the major losers in the index.

Meanwhile, service sector activity in India showed strong performance in the month of May as it expanded at the fastest clip in last three months largely because of significant increase in new work orders. According to the data compiled by Markit, the HSBC Business Activity Index, which measures the service sector activity in the nation, bounced from 52.8 in April to a three-month high of 54.7 in May. A figure above 50 signals increase in production while, a number below 50 indicates decrease in production.

The resilient performance in the country's service sector was due to continued rise in new business growth and a strong expansion of new orders. The data also highlighted that though the rate of jobs growth remained marginal, employment in service sector continued to increase. Service providers were more sanguine about one-year outlook, which is evident since the index measuring business expectations zoomed to a 15-month high of 76.7 in May from 73.8 in April, more than 14 points above its March level.

However, inflation remained a cause of concern as input price inflation in the sector climbed to a strong rate while the rise in output prices too was sharp, the highest in four months, and higher than the long-run trend. Nevertheless, the data spurred some respite as it was quite opposite to the government's recently released fourth quarter gross domestic product (GDP) growth numbers which underscored that Asia's third largest economy expanded at its slowest annual pace in almost nine years.

Moreover, the HSBC Composite Output Index, which encompasses both manufacturing and service sectors' activity, ascended to 55.3 in May, from 53.8 in the previous month largely because of sharp rise in services PMI and steady manufacturing PMI. Amid increasing speculations that the Reserve Bank of India in its mid-quarter policy review on June 18 would take some policy action to bring India's deteriorating economy out of doldrums, these PMI numbers emphasize on the fact that there is little room for aggressive monetary policy easing over the near term.

The S&P CNX Nifty is currently trading at 4,893.85, higher by 45.70 points or 0.94% after trading as high as 4,898.95 and as low as 4,864.25. There were 38 stocks advancing against 12 declines on the index.

The top gainers on the Nifty were R Infra up 3.70%, SBI up 2.97%, Asian Paints up 2.87%, Hindalco up 2.77% and Grasim up 2.68%.

Ambuja down 2.03%, DLF down 1.53%, Tata Motors down 1.29%, Bharti Airtel down 0.68% and HUL down 0.53% were the major losers on the index.

In the Asian space, Shanghai Composite inched up 0.02%, Hang Seng climbed 0.70%, Jakarta Composite jumped 1.84%, KLSE Composite advanced 0.44%, Nikkei 225 surged 1.04%, Straits Times Index ascended 0.72%, KOSPI Composite Index soared 1.05% and Taiwan Weighted garnered 1.53%.

The European markets got off to a positive start as France's CAC 40 climbed 0.69% and Germany's DAX advanced 0.55%.

Stock markets in the United Kingdom remained closed on Tuesday for a national holiday.