Indian benchmarks continue to trade firm; Bajaj Auto’s earnings disappoint

Indian equity markets sustained the sanguine momentum in Thursday afternoon trades as the benchmarks surged around a percent and stayed above the psychological 5,000 (Nifty) and 16,600 (Sensex) levels in the session. After a day of consolidation, investors kept piling up positions with conviction as sentiments got buttressed by not only encouraging weekly inflation data from the domestic front but also from the strength in markets across the globe. Investors’ morale got a boost in the session after weekly food inflation continued to languish in the negative terrain for the third straight week in the period ended January 7 as it stood at -0.42%. Stocks from the rate sensitive counters like high beta realty, banking and automobile remained in demand after the upbeat inflation numbers as investors speculated that the RBI would abstain from its monetary tightening measures and shift its focus to spur economic growth. However, the information technology pocket continued to face the ire of investors after IT bellwethers like Infosys and TCS’ earnings disappointed the street amid expectations that slowdown in major software and technology importing regions like Europe and the US will impact future earnings. Meanwhile, three-wheeler major Bajaj Auto got punished in the session on announcing quarterly earnings that were below the street expectations. Leads from the Asian peers too remained impressive as most markets in the region traded around a percent higher. A slew of encouraging developments such as overnight jump in US equities, encouraging US homebuilders’ confidence report and IMF’s plans to expand its lending capacity by as much as $500 billion in order to prevent fallout from the Euro-zone crisis, averting a global recession, bolstered investors risk taking confidence in the session. The European futures too indicated a positive opening for the markets there as investors seemed to be shifting their focus to French and Spain’s debt auction.

Moreover, the broader markets traded on a strong note with over a percent gains, largely moving in tandem with their larger peers. The bourses surged on good volumes of over Rs 0.50 lakh crore. The market breadth on BSE was in favor of advances in the ratio of 1588:893 while 112 scrips remained unchanged.

The BSE Sensex is currently trading at 16,605.41 up by 153.94 points or 0.94% after trading as high as 16,662.06 and as low as 16,573.42. There were 21 stocks advancing against 9 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index surged 1.24% and Small cap soared 1.13%.

On the BSE sectoral space, Realty up 2.45%, Metal up 2.40%, Power up 1.89%, Bankex up 1.78% and Auto up 1.37% were the major gainers while IT down 0.55%, TECk down 0.51%, were the only losers in the space.

Sterlite up 4.45%, Tata Power up 3.99%, DLF up 3.95%, Tata Steel up 3.42% and Hindaclo up 3.27% were the major gainers on the Sensex, while BHEL down 2.62%, Infosys down 0.90%, Bharti Airtel down 0.88%, Cipla down 0.78% and Wipro down 0.55% were the major losers in the index.

Meanwhile, India’s weekly food inflation, measured by the Wholesale Price Index (WPI), continued to languish in the negative terrain for the third straight week for the week ended January 7, 2012 but rose to -0.42% from its previous levels of 2.90% for the week ended December 31. The rise in inflation can largely be attributed to rising demand for primary articles including both food and non-food items.

The sharp slump in the rate of price rise of food items in last two months is evident because of the high statistical base of the last year. 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.

According to the data released by the Ministry of Commerce and Industry, the index for ‘Food Articles’ group rose by 0.1% to 190.9 from 190.8 for the previous week due to higher prices of jowar and maize (3% each), bajra, masur and poultry chicken (2% each) and barely, arhar, moong and fish-marine (1% each).  However, the prices of tea (2%) and egg and condiment & spices (1% each) declined.

The index for ‘Non-Food Articles’ group rose by 0.9% to 182.6 from 181 for the previous week due to higher prices of gaur seed (4%), flowers, rape & mustard seed, soyabean and niger seed (3% each), raw cotton (2%) and raw jute and linseed (1% each).  However, the prices of raw rubber (4%), sunflower (3%) and castor seed (1%) declined.

As a result, the index for ‘Primary Articles’, which accounts for 20.12% of the WPI, rose by 0.3% for the week ended January 7 to 199.1 from 196.6 for the previous week. The annual rate of inflation, calculated on point to point basis, stood at 2.47% for the period under consideration as compared to 0.51% for the previous week.

Meanwhile, the index for Fuel & Power group, which carries a weightage of 14.91% in WPI remained unchanged at its previous closing levels of 172.7 in the week while annual rate of inflation calculated on point to point basis too stood unchanged at 14.45% in the first week of the year 2012.

The S&P CNX Nifty is currently trading at 5,006.40, higher by 50.60 points or 1.02% after trading as high as 5,014.85 and as low as 4,991.40. There were 41 stocks advancing against 9 declines on the index.

The top gainers on the Nifty were R Infra up 7.79%, Sterlite up 4.58%m, Tata Power up 3.88%, DLF up 3.82% and JP Associates up 3.75%.

BHEL down 2.75%, Bharti Airtel down 1.17%, Bajaj Auto down 1.03%, Infosys down 0.95% and Wipro down 0.64% were the major losers on the index.

Asian markets were largely trading on a negative note; Shanghai Composite surged 1.25%, Hang Seng soared 1.15%, Jakarta Composite climbed 0.56%, Nikkei 225 jumped 1.04%, Straits Times advanced 0.57%, Seoul Composite garnered 1.19%.

Stock markets in Taiwan remained shut on Thursday in observance of a public holiday.