Sensex trades flat, Nifty below 8,250; Tata Motors top gainer

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The benchmark indices on Monday pared gains to turn flat even as Asian markets were trading higher after the US payrolls data released on Friday indicated strong underlying wage growth, strengthening the case for more rate increases in 2017.

Gains capped by the advance estimates of gross domestic product (GDP) data for fiscal year 2017, which indicated a slowdown in growth even though the figures do not take into account the demonetisation impact. 

At 12:31 am, the S&P BSE Sensex was trading at 26,761, up 2 points, while the broader Nifty50 was ruling at 8,243, down 0.3 points. 

Broader markets outperformed the headline indices with BSE Midcap and BSE Smallcap adding 0.3% and 0.5%, respectively.

"The stay inside the 8,300-8,350 region has been brief and has not been surprsinng, but the turn lower thereof has lent a neutral bias, retaining the potential for directional moves on either side. Upside prospects will be open above 8,260, but will be limited to 8,330-8,350 for the time being, though, the 8,580 view remains in play. Meanwhile, direct fall below 8,260 could call for 8,120," said brokerage BNP Paribas in a technical note.

Sectors and stocks

Tata Motors was the top Sensex gainer and added over 1% to Rs 505, bouncing back 3% from intra-day low after the company said Jaguar Land Rover (JLR) reported 12% rise in total retail sales of 55,375 vehicles in December 2016 over the previous year. 

Aurobindo Pharma rallied over 3% after the pharma major informed that its wholly owned step-down subsidiary, Agile Pharma BV, Netherland has entered into an agreement to acquire 100% shareholdings in Generis Farmaceutica SA, a Portuguese pharmaceutical company engaged in the manufacture and marketing of pharma products in Portugal.

BEML surged 20% to Rs 1,189 on the BSE in intra-day after the company said the Cabinet has given an ‘in-principle’ approval for strategic disinvestment of 26% equity shares in BEML out of the government’s shareholding of 54.03%.

Among losers, Granules India dipped nearly 11% to Rs 97.80 after the pharmaceutical company said it has received 11 observations from Infarmed (InstitutoNacional da Farmacia E Do Medicamento), the Portuguese drug regulator, for its facility located at Gagillapur, Telangana.

GDP growth slows to 7.1% in FY17

The GDP growth is estimated to slow down to 7.1% in the current fiscal, from 7.6% in 2015-16, mainly due to slump in manufacturing, mining and construction sectors, the government data showed on Friday without factoring in 'volatile' post-demonetisation figures.

Domestic rating agency Icra, however, pegged the expected growth for 2016-17 lower at 6.8%.

"Given the impact of demonetisation on actual activity from mid-November 2016 onward, projecting GDP growth for the full year by extrapolating the trends up to October 2016 for several sectors, may introduce more errors than in earlier years. This would be particularly apt for cash intensive sectors such as construction," Icra said in a statement.

US job growth slows, but wages rebound 

US employment increased less than expected in December but a rebound in wages pointed to sustained labor market momentum that sets up the economy for stronger growth and further interest rate increases from the Federal Reserve this year.

Nonfarm payrolls rose by 156,000 jobs last month, the Labor Department said on Friday. The gains, however, are more than sufficient to absorb new entrants into the labor market.

Meanwhile, Chicago Federval Reserve President Charles Evans on Friday said that US economic conditions are likely to call for two interest-rate hikes in 2017, but a forecast of three hikes is not implausible. 

Evans added he was sticking with expectation of two rate hikes that he made in September even though things are now a little bit stronger than they were then.

Global markets

Asian markets were trading higher on Monday. MSCI's ex-Japan Asia-Pacific shares index rose 0.3% after posting a rare loss in the previous session. Australia's S&P/ASX200 rose 1% while Hong Kong shares rose 0.4%. Trading was light because Japan is shut for a holiday. Meanwhile, China's Shanghai Composite rallied 0.5%.

On Friday, The Dow Jones Industrial Average rose 64.51 points, or 0.32%, to end at 19,963.8 points. The index rose as high as 19,999.63 but lost ground. The S&P 500 gained 7.98 points, or 0.35%, to 2,276.98, its highest close ever. The Nasdaq Composite added 33.12 points, or 0.6%, to 5,521.06, also a record.

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