Markets remain in red on worries of RBI putting a pause on its rate cuts

Indian markets continue to trade downbeat in the early noon session, some regional peers too have pared their early gains and were weighing down the sentiments of the domestic markets. However, after the Greek jitters got over markets are concerned with domestic factors, with the CPI inflation for the month of June surging to its eight months high, it raised concern of delay in any rate cut by the RBI who in its upcoming policy review may be putting a pause. Both the benchmarks were trading the crucial levels of 27900 (Sensex) and 8450 (Nifty) and were facing stiff resistance in moving up. There was not much positive cue that could support the markets and the further weakness in rupee too was weighing down the sentiments. Also, there was some concern with India Ratings despite retaining its 7.7 per cent growth forecast for this year calling for continuous government interventions to fill the deficits in physical and social infrastructure spaces for long-term higher growth. On the sectoral front, auto, banking and IT were showing some selling pressure, while gains in consumer durables, oil & gas and capital goods were prohibiting markets from falling deeper into red. In scrip specific action Ramco Systems surged by around 10 percent on signing a multi-million dollar deal with Australia-based Cobham Aviation Services.

The BSE Sensex is currently trading at 27916.11, down by 45.08 points or 0.16% after trading in a range of 27853.96 and 27995.04. There were 13 stocks advancing against 17 stocks declining on the index.

The broader indices trading in green were outperforming the benchmarks; the BSE Mid cap index was up by 0.37%, while Small cap index gained 0.49%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 0.88%, INFRA up by 0.62%, PSU up by 0.61%, Consumer Durables up by 0.52%, Capital Goods up by 0.51%, while Auto down by 0.71%, Bankex down by 0.40%, TECK down by 0.06%, IT down by 0.05% were the losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 1.82%, Coal India up by 1.65%, Lupin up by 1.29%, BHEL up by 1.11% and Cipla up by 0.80%. On the flip side, Tata Motors down by 2.18%, Hindalco down by 1.08%, SBI down by 0.99%, Mahindra & Mahindra down by 0.95% and Vedanta down by 0.81% were the top losers.

Meanwhile, surging to its eight month high, the retail or the Consumer Price Index (CPI) inflation for the month of June recorded 5.4 percent, compared to 5.01 percent in May and 6.77 percent in June last year, mainly due to costlier food items. As per the data of Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation the Consumer Food Price Index (CFPI) increased to 5.48 percent in June compared to 4.80 percent in May and 7.21 percent in June 2014.

The General Indices (Provisional) for the month of June 2015 for Rural, Urban and Combined stood at 124.1, 121.7 and 123.0 respectively, while the CFPI for Rural, Urban and Combined for the same month were recorded at 126.2, 128.6 and 127.1 respectively.

The sharp rise in the inflation numbers were due to rise in food inflation, which sequentially showed jump of more than 60 basis points. Not only vegetable and pulses prices increased but there was spike up in protein items. As per the data released by the CSO, prices of pulses rose by 22.24% in June year-on-year, while the inflation for fruit and vegetables was 3.51% and 5.37%, respectively, in the month under review. Among others, milk and its products inflation increased by 7.18% in June over the same month last year.

Most strikingly, the data showed that prices of protein-rich items like meat and fish rose by 6.99%, while spices turned costlier by 9.71% in the month. Among other categories, oils and fats prices rose by 3.06%, cereals and products by 1.98%, while that of egg rose by 5.09% in June. Some respite came from the front of sugar and confectionery items front where the prices fell by 8.55% in June compared to same month last year.

The rise in inflation, a key factor considered by the RBI in deciding the bi-monthly monetary policy is likely to limit its rate coming room in upcoming policy review, the spike has once again taken the numbers close to RBI’s revised annual target of 6 percent. Though, government might be downplaying the spike-up as a blip and expects it to come down on the back of better monsoon and favourable base effect next month, but the costlier food item is likely to prompt RBI to press the pause button on rate cuts.

The CNX Nifty is currently trading at 8445.05, down by 14.60 points or 0.17% after trading in a range of 8424.10 and 8470.60. There were 21 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were BPCL up by 1.87%, Hero MotoCorp up by 1.84%, Coal India up by 1.77%, Lupin up by 1.40% and BHEL up by 1.26%. On the flip side, Tata Motors down by 2.16%, Kotak Mahindra Bank down by 1.12%, Hindalco down by 1.08%, SBI down by 1.06% and Vedanta down by 0.91% were the top losers.

The Asian markets were showing a mixed trade, Straits Times was up by 1.83 points or 0.06% to 3,313.05, Taiwan Weighted gained 7.84 points or 0.09% to 9,041.76, FTSE Bursa Malaysia KLCI was higher by 8.39 points or 0.49% to 1,724.50, Jakarta Composite added 23.03 points or 0.47% to 4,916.95 and Nikkei 225 surged by 295.56 points or 1.47% to 20,385.33.

On the other hand, Hang Seng lost 301.51 points or 1.2% to 24,922.50, Shanghai Composite declined by 112.39 points or 2.83% to 3,857.99 and KOSPI Index was lower by 2.29 points or 0.11% to 2,059.23.