Markets recover early losses on lower than expected WPI data; Sensex bounces back into green

Local barometer gauges reversed all its losses after the release of narrower than expected Wholesale price index, WPI data which slid to two months low at 5.20% on account of decline in Fuel & Power index, mainly lifted the sentiment at Dalal Street. Meanwhile, bargain buying activities by select market-participants ahead of the crucial event of election results on May 16 amidst continued optimism that the Bharatiya Janata Party (BJP) and its allies would win a clear majority also aided markets’ recovery. Off day’s low, While Sensex bounced back in positive terrain to trade above the crucial 23,800 level, Nifty albeit in red with slender loss, reclaimed the crucial 7,100 mark. However, the session turned out to be harrowing for broader indices, which were trading lower with losses in the range of 0.35%-0.55%.

On the global front, Asian pacific shares stepped back from highs on profit-booking amidst concerns over the situation in Ukraine, with Japanese markets declining despite better than expected GDP data. Japan's gross domestic product jumped 5.9 percent on year in the first quarter of 2014 that was well above forecasts for an increase of 4.2 percent following the 0.7 percent gain in the previous three months. Meanwhile, European markets got off to a muted start as mixed national GDP data from France and Germany contrasted with some upbeat corporate earnings, keeping key indexes within striking distance of multi-year highs.

Closer home, majority of the sectoral indices on BSE were trading into positive terrain, with stocks from Information Technology, Technology and Capital Goods counters trading contrary to the trend. Meanwhile, banking stocks also lost out on account of profit-booking, while results of Bank of India also disappointed. On the flip side, stocks from Power, Consumer Durable, Realty counters were the top performers of the session, which witnessed maximum demand. The overall market breadth on BSE is in the favour of declines which thumped advances in the ratio of 1558:1008; while 144 shares remained unchanged.

The BSE Sensex is currently trading at 23821.90, up by 6.78 points or 0.03% after trading in a range of 23,971.78 and 23742.75. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices witnessed additional selling pressure; with both BSE Mid cap and Smallcap index trading lower by 0.34% and 0.55% respectively.

The gaining sectoral indices on the BSE were Power up by 1.38%, Consumer Durables up by 0.85%, Realty up by 0.58%, Healthcare up by 0.24% and Auto up by 0.23%. On the flip side, IT down by 0.75%, TECK down by 0.73%, Capital Goods down by 0.56%, Bankex down by 0.13% were the losing indices on BSE.   

The top gainers on the Sensex were NTPC up by 3.66%, Tata Steel up by 2.82%, Tata Power up by 2.65%, Sun Pharma up by 2.26% and Axis Bank up by 1.49%. On the flip side, Coal India down by 1.49%, ICICI Bank down by 1.39%, Wipro down by 1.23%, L&T down by 1.14% and TCS down by 0.98% were the top losers on the index.

Meanwhile, in a complete divergence to Retail Inflation data, the annual rate of inflation, based on monthly WPI, eased in-line with expectation at two month low of 5.20% in month of April, 2014, as compared to 5.70% for the March and 4.77% during the corresponding month of the previous year. However, in a bit of worry February Inflation stood higher at 179.5 as compared to 178.9 (provisional) and annual rate of inflation based on final index stood revised at 5.03% as compared to 4.68 percent respectively. Meanwhile, build up inflation rate in the financial year so far stood at 0.22% compared to a build up rate of 0.71% in the corresponding period of the previous year.

The decline in headline inflation was mainly on account of decline in Fuel & Power index, which occupies 14.91% weight in the overall index. The group slid by 1.0% to 211.0 (provisional) from 213.1 (provisional) for the previous month due to lower prices of aviation turbine fuel and furnace oil (4% each), LPG and petrol (2% each) and kerosene and bitumen (1% each).

Meanwhile, Primary article index, which occupies 20.12% weight in the overall headline index, rose by 1% to 242.5 (provisional) from 240.2 (provisional) for the previous month on account of 1.5% surge in Food Articles at 238.8. On the flip side, index for Non-Food Articles group declined by 0.4% to 216.3 (provisional) from 217.2 (provisional) for the previous month.

Further, the index of Manufacture Products, which occupies the majority 64.97% weight in WPI index, rose by 0.2% to 153.8 (provisional) from 153.5 (provisional) for the previous month on account of surge of food articles by 0.8% at 153.8 (provisional) from 153.5 (provisional) for the previous month.

However, the headline inflation does not assume much of significance ever-since Reserve Bank of India moved its focus to CPI, being the main index in terms of key determinants. A factor that matters is the higher Retail inflation figures, which has surged to three months high at 8.59% in April, driven by higher food prices, notably ahead of RBI’s monetary policy review on June 3, 2014. Additionally, sticky core inflation, which stood at 3.4% in April against 3.5% in March, also remains to be cause of worry.

The CNX Nifty is currently trading at 7,103.30, down by 5.45 points or 0.08% after trading in a range of 7,152.55 and 7,082.55. There were 25 stocks advancing against 25 declining on the index.

The top gainers of the Nifty were NTPC up by 3.78%, Tata Powers up by 2.77%, Tata Steel up by 2.67%, PNB up by 2.20% and Sun Pharma up by 2.07%. On the flip side, Asian Paint down by 5.00%, Bank of Baroda down by 3.31%, NMDC down by 2.04%, Ambuja Cement down by 1.65% and Coal India down by 1.54% were the major losers on the index.

Asian equity indices were trading mixed; Hang Seng up by 0.18%, Taiwan Weighted up by 0.06% and Straits Times up by 0.18%. While, Shanghai Composite down by 1.12% and Nikkei 225 down by 0.75% were the only losers amongst Asian pack.

European markets got off to a muted start; with United Kingdom’s FTSE 100 trading flat, France’s CAC 40 index  declining by 0.14% and Germany’s DAX trading lower by 0.04%.