Indian equities prune losses in noon trades; inch closer to the neutral line

Indian markets have gone on to regain almost all the ground lost in the previous session and are currently trading with marginal losses just below the previous closing levels. Hefty short covering in technology and the defensive - FMCG counters have pulled the frontline indices above the psychological 4,850 (Nifty) and 16,100 (Sensex) levels. However, huge losses in Oil & Gas sector and rate sensitive Realty and Bankex counters has limited the upside chances for the markets. Index heavyweight Reliance industries plunged around two percent in the session, weighing heavily on the bourses. However, investors’ sentiments improved in the session after government data showed that India’s headline inflation plummeted below the uncomfortable 9% for the first time since December, 2010 to the lowest levels in around two years to 7.47%. Post this plunge in inflation, the RBI in its third quarterly monetary policy review on January 24 is widely expected to refrain from its aggressive monetary tightening measures for the second time owing to the declining trend in WPI inflation. On the global front, sentiments continued to remain somber as all Asian equity indices traded with grave loses after global ratings agency S&P's downgraded nine nations in the European region over the weekend, including France and Austria which lost the coveted AAA rating, escalating worries over the onerous Euro-zone debt crisis. While the European futures indicated a negative opening for the markets there ahead of France’s debt auction.

Moreover, the broader markets traded on a flat note, lacking any fervor in tandem with larger peers. The bourses eased on good volumes of over Rs 0.50 lakh crore. The market breadth on BSE was in favor of declines in the ratio of 1244:1204 while 106 scrips remained unchanged.

The BSE Sensex is currently trading at 16,133.71 down by 20.91 points or 0.13% after trading as high as 16,148.98 and as low as 16,037.60. There were 12 stocks advancing against 18 declines on the index.

The broader indices were trading on a mixed note; the BSE Mid cap index shed 0.25% and Small cap added 0.23%.

On the BSE sectoral space, IT up 2%, TECk up 1.70%, FMCG up 0.50% and Metal up 0.04% were the only gainers while Oil & Gas down 1.29%, Bankex down 1.16%, Realty down 1.02%, Healthcare down 0.62%, and PSU down 0.52% remained the major losers in the space.

TCS up 2.25%, Infosys up 2.13%, Maruti up 1.61%, Sterlite up 1.60% and Wipro up 1.60% were the major gainers on the Sensex, while RIL down 1.90%, DLF down 1.81%, HDFC Bank down 1.76%, HUL down 1.75% and NTPC down 1.66% were the major losers in the index.

Meanwhile, India’s headline inflation measured by the Wholesale Price Index (WPI) for the month of December 2011 finally sank below the uncomfortable 9% for the first time since December, 2010 to the lowest levels in around two years to 7.47%. The inflation reading in the month of November was at 9.11%. The decline in headline inflation is on the back of the sharp decline in prices of primary articles and food articles. However, in the month of December, manufactured products and fuel & power inflation slipped only marginally to 7.41% and 14.91% as compared to 7.70% and 15.48% respectively.

According to the data released by the ministry of commerce and industry, the annual rate of inflation, based on monthly WPI, stood at 7.47% in December as compared to 9.11% for the previous month and 9.45% during the corresponding month of the previous year. Build up inflation in the financial year so far was 4.95% compared to a buildup of 7.12% in the corresponding period of the previous year.

On the month-on-month basis, primary articles declined by 1.6% to 197.9 from 201.1 for the previous month. The index for ‘Food Articles’ group declined by 3.1% to 190.8 from 196.9 for the previous month due to lower prices of fruits & vegetables (13%), condiments & spices (6%), urad (5%), poultry chicken   (3%),  tea (2%) and jowar, rice, arhar, ragi and barley (1% each).  However, the prices of pork (8%), fish-marine   (5%), maize (3%), bajra, egg, beef & buffalo meat, mutton and masur (2% each) and gram, coffee, wheat and milk (1% each) moved up.

The index for ‘Non-Food Articles’ group rose by 1.3% to 178.6 from 176.3 for the previous month due to higher prices of gaur seed (20%), flowers (14%), linseed (8%), soyabean (6%), rape & mustard seed (5%), raw silk (4%), sunflower and raw rubber (3% each), safflower, groundnut seed and niger seed (2% each) and gingelly seed and fodder (1% each).  However, the prices of cotton seed (6%), castor seed (4%), coir fibre, raw cotton and raw jute (3% each) and copra (1%) declined.

The index for ‘Minerals’ group rose by 2.6% to 318.5 from 310.5 for the previous month due to higher prices of sillimanite (50%),  barytes (6%), iron ore and bauxite (4% each), dolomite and crude petroleum (3 % each) and magnesite (1%).  However, the prices of steatite (7%) and copper ore (4%) declined.

The index for the Fuel and Power, which has weight of almost 15% in the WPI, rose by 0.6% to 172.6 from 171.6 for the previous month due to higher prices of naphtha (5%), aviation turbine fuel, light diesel oil and bitumen (4% each) and furnace oil (3%).  However, the prices of petrol (3%) declined.

The index for Manufactured Products, which has weight of almost 65% in the WPI, rose by 0.6% to 140.6 from 139.8 for the previous month. Under this segment, the index for Beverages, Tobacco & Tobacco Products, Food products, Wood & Wood Products, Leather & Leather Products, Chemicals & Chemical Products, Non-Metallic Mineral Products, Basic Metals, Alloys & Metal Products and Transport, Equipment & Parts rose while the index for Paper & Paper Products, Textiles declined in the month under review.

The sharp decline in headline inflation has come after the RBI has increased its key policy rates for 13 times since March 2010. The Indian central bank is scheduled to meet for its third quarterly monetary policy review on January 24 and it is widely expected that the Reserve Bank may refrain from its aggressive monetary tightening measures as the WPI inflation has primarily been on a declining trend.

The S&P CNX Nifty is currently trading at 4,852.30, lower by 13.70 points or 0.28% after trading as high as 4,858.95 and as low as 4,827.05. There were 16 stocks advancing against 34 declines on the index.

The top gainers on the Nifty were TCS up 2.39%, Infosys up 2.20%, HCL Tech up 1.87%, Wipro up 1.60% and Maruti up 1.55%.

Kotak Bank down 2.96%, R Power down 2.96%, JP Associates down 2.65%, NTPC down 1.93% and HDFC Bank down 1.93% were the major losers on the index.

Asian markets were trading on a negative note; Shanghai Composite plunged 1.71%, Hang Seng sank 1.04%, Jakarta Composite declined 0.90%, Nikkei 225 plummeted 1.43%, Straits Times dived 1.53%, Seoul Composite shed 0.83% and Taiwan Weighted slipped 1.09%.