Indian equities negotiate a positive close; ease in Dec inflation supports

Indian equity markets started the fresh week on a sluggish note but managed to eke out some gains by the end of trade as the benchmark indices clawed back into the green terrain in the last leg of trade on getting some supportive leads from the European markets. The frontline gauges met with some resistance around the psychological 4,900 (Nifty) and 16,200 (Sensex) levels in dying moments of trade which pushed the indices to lower levels. Nevertheless, the key gauges managed to extend the uptrend for second straight session as hefty buying in the beaten down information technology and capital goods counters capped the downside risks for the bourses. Stocks from the technology pocket rose ahead of the earnings announcement of bellwethers like TCS and Wipro. But huge losses in Oil & Gas sector limited the upside for the markets as heavyweight Reliance industries plunged around two and half a percent in the session, weighing heavily on the bourses. However, sentiments got some support from the encouraging monthly inflation data which 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. Meanwhile the data showing rise in India’s fiscal deficit went unnoticed in the session. On the global front, sentiments remained somber across the Asian space following global ratings agency S&P's downgrade of nine European nations, including France and Austria which lost the coveted AAA rating, escalating worries over the onerous Euro-zone debt crisis. But the European markets showed some optimism initially which provided the much needed support to local sentiments, helping them to move into the green zone in late trade.

Earlier on Dalal Street, the benchmark got off to a sedate opening tracking the dismal leads prevailing in Asian markets following S&P's mass rating downgrade of Euro-zone countries. The frontline indices kept losing steam thereafter and even drifted to the lowest point in the session in mid morning trades. But the indices managed to pare most of the losses in early afternoon trades on getting encouraging December inflation numbers. After trading in a tight range for some time, the key gauges managed to gain some momentum and bounced into the positive terrain by the end of trade. Eventually, the NSE’s 50-share broadly followed index Nifty, added single digit gains to settle above the crucial 4,850 support level while Bombay Stock Exchange’s Sensitive Index or Sensex gained around thirty five points and ended below the psychological 16,200 mark. Moreover, the broader markets traded in tandem with their larger peers and finished the session on a flat note. On the BSE sectoral space, the Capital Goods counter remained the top gainer in the space with over two percent gains followed by the beaten down Information Technology pocket which surged close to two percent. On the flipside, Oil & Gas counter languished at the bottom of the table with large cuts of over one and half a percent while the defensive Healthcare and rate sensitive Realty and Bankex sectors settled with moderate cuts of around half a percent. The markets rose on weaker volumes of over Rs 1.03 lakh core while the turnover for NSE F&O segment also remained on the lower side as compared to that on Friday at over Rs 0.86 lakh crore. The market breadth remained positive as there were 1403 shares on the gaining side against 1344 shares on the losing side while 96 shares remained unchanged.

Finally, the BSE Sensex gained 34.74 points or 0.22% to settle at 16,189.36, while the S&P CNX Nifty rose by 7.90 points or 0.16% to close at 4,873.90.

The BSE Sensex touched a high and a low of 16,214.36 and 16,037.60 respectively. The BSE Mid cap index was down by 0.03% and Small cap index was up by 0.33%.

The major gainers on the Sensex were BHEL up 3.67%, Maruti Suzuki up 2.89%, L&T up 2.56%, Sterlite Industries up 2.56% and SBI up 2.22%. While, Reliance down 2.55%, NTPC down 2.35%, HDFC Bank down 1.74%, Hindustan Unilever down 1.56%  and DLF down 1.55%, were the major losers on the index.

On the BSE sectoral space, Capital Goods up 2.07%, IT up 1.80%, TECk up 1.59%, Auto up 0.78% and FMCG up 0.69% were the top gainers, while Oil & Gas down 1.71%, Health Care down 0.62% and PSU down 0.57%, Realty down 0.52% and Bankex down 0.30% were losers on the BSE sectoral space.

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 touched a high and low of 4,880.80 and 4,827.05, respectively.

The top gainers on the Nifty were Maruti Suzuki up 4.38%, BHEL up 3.64%, L&T up 3.03%, SBI up 3.03% and IDFC up 2.90%.

On the flip side, Reliance Power down 3.30%, NTPC down 2.68%, Kotak Bank down 2.45%, Reliance down 2.26% and HDFC Bank down 2.03% were the top losers on the index.

The European markets were trading mixed. France's CAC 40 down 0.39%, Britain’s FTSE 100 down by 0.43% and Germany's DAX up by 0.16 points.

Asian equity markets ended with grave losses on Monday ahead of a debt sale by France after Standard & Poor’s stripped the nation’s AAA rating and downgraded eight other European nations, stoking fears the region’s debt crisis may deteriorate. The rating cuts will keep market focus pinned on auctions, with France and Spain providing another key test of investor confidence this week, but also increase pressure for urgent policy responses from European leaders. Meanwhile, Japan’s Nikkei 225 Stock Average fell 1.4% even after a report showed the country’s machine orders in November jumped to the highest level since January 2008.