Indian equities pare gains to continue weak trade in red

Indian equities pared off gains after hitting fresh intraday highs to continue its weak trade below neutral line in the late afternoon session on back of selling in the frontline blue chip counters. Investor were also cautious on the backdrop of weak February industrial production numbers and slight moderation in March WPI inflation to 6.89% v/s 6.95% in February. Traders were seen piling up position in FMCG, Capital Goods and Realty sector while selling was witnessed in IT, TECk and Oil & Gas sector. Besides, investors showed buying interest in rate sensitive counters amid hopes of an imminent interest rate cut and start of a monetary easing cycle by India’s central bank at its Monetary and Credit Policy meet on April 17, 2012. Infosys, TCS and HCL Tech from IT counter were trading weak in red pulling the markets down. Industry heavyweight RIL was trading weak in red exerting pressure on the market. Also, ONGC from Oil & Gas counter was trading weak drifting markets lower. L&T and BHEL from Capital goods space was seen trading firm in green pulling the markets higher. ITC from FMCG pack was trading in green pushing the markets higher. DLF from Realty counter was trading in green giving the much needed support.

On the global front, Asian markets were trading in red while the European markets were trading on a mix note. On the home turf, the NSE Nifty and BSE Sensex were trading above their psychological 5,200 and 17,000 levels respectively. The market breadth on BSE was in favor of advances in the ratio of 1348:1267 while 126 scrips remained unchanged.

The BSE Sensex is currently trading at 17,064.74 down by 29.77 points or 0.17% after trading as high as 17,159.30 and as low as 17,010.16. There were 15 stocks advancing against 15 declines on the index.

The broader indices were trading on a positive note; the BSE Mid cap index advanced 0.21% while Small cap gained 0.24%.

On the BSE sectoral space, FMCG up 0.86%, Capital Goods up 0.60%, Realty up 0.52%, Bankex up 0.28% and Auto up 0.26% were the major gainers, while TECk down 1.36%, IT down 1.28%, Oil & Gas down 0.42%, Power down 0.27% and Health Care down 0.16% were the top laggards in the space.

ITC up 1.86%, Maruti Suzuki up 1.13%, SBI up 1.12%, L&T up 1.04% and Wipro up 0.96% were the major gainers on the Sensex, while Infosys down 2.51%, Bharti Airtel down 2.06%, Sun Pharma down 1.50%, M&M down 1.40% and Hindalco Industries down 1.24% were the major losers in the index.

Meanwhile, coming in a tad higher than expected, the headline inflation rose by 6.89% in March from a year earlier, mainly driven by higher food prices. However, manufacturing inflation, which is the key number that the RBI will look at before taking a stance on monetary policy, has come in much lower than expected hence fuelling expectations of a rate cut.

 According to the data released by the government, headline inflation as measured by the wholesale price index (WPI) in the month of March grew by a 6.89% as compared to 6.95% for the previous month and 9.68% during the corresponding month of the previous year. The inflation rate for January too was revised upwards to 6.89% as compared to 6.55% (Provisional). 

The 'All Commodities' index (Base 2004-05=100) for the month of March rose by 0.9% to 159.8 from 158.4 for the previous month. The major dampener was the inflation in food items which was 9.94% in March, as against 6.07% in February.

Manufacturing inflation moderated to 4.87%, from 5.75%. As stated earlier, this is the number that the RBI will be looking at before announcing its monetary policy. Since this has shown a declining trend, a rate cut seems eminent.  The RBI is widely expected to cut its main lending rate - the repo rate - by 25 basis points to 8.25% when it reviews policy tomorrow.

Year-on-year, among manufactured items, iron grew dearer by 17.18% and edible oil prices rose by 9.78%. Inflation in tobacco products and basic metals was 8.22% and 9.51% respectively.  Non-food primary articles, which include fibres and oilseeds, was however lower at (-) 1.20% in March. In February, it was (-) 2.56%. Inflation in the fuel and power segment was 10.41% on an annual basis. The rate of price rise was 12.83% in the previous month.

Experts are of the view that inflationary pressure, driven by prices of food articles will keep the pressure on the government to remove supply side bottlenecks.

The S&P CNX Nifty is currently trading at 5,201.40, lower by 6.05 points or 0.12% after trading as high as 5,229.40 and as low as 5,183.50. There were 24 stocks advancing against 26 declines on the index.

The top gainers on the Nifty were ITC up 1.90%, Axis Bank up 1.56%, JP Associates up 1.42%, Maruti Suzuki up 1.22% and L&T up 1.20%.

Ambuja Cement down 2.76%, Infosys down 2.56%, Bharti Airtel down 2.33%, ACC down 2.00% and M&M down 1.52% were the major losers on the index.

In the Asian space, Shanghai Composite eased 0.09%, Hang Seng declined 0.44%, Jakarta Composite lost 0.39%, KLSE Composite down 0.32%, Nikkei 225 plummeted 1.74%, Straits Times inched down 0.04%, Seoul Composite declined 0.81% and Taiwan Weighted sank 0.75%.

The European markets were trading on a mix note, France’s CAC 40 gain 0.31%, Germany’s DAX slipped 0.26% and Britain’s FTSE 100 fell 0.81%.