Benchmarks slips into red, continues trading weak

Indian equity indices have drifted lower paring all gains and are trading on a weak. Investors seems to be reluctant in accumulating front line counters on speculation that the country’s central bank may continue raising rates to contain inflation that stayed at more than 9 percent in July for the eighth consecutive month. Market participant were seen piling up the positions in IT, TECk and Capital Goods while selling was witnessed in Realty, Metal and Health Care sector. Stocks like Bata India, Gujarat Fluorochemicals, Gujarat Gas, Aanjaneya Lifecare and Insecticides India hit new high while stocks like Cambridge Solutions, Allsec Technologies, Allied Digital, Raj Oil, DEN Networks, Vascon Engineering and IndiaBulls Power hit new low. Rate sensitive sector like Realty was the major drags in the market while IT is seen pulling the markets up. Commerce ministry released India’s inflation numbers for the month of July which slowed to 9.22% against 9.44% in June despite the spillover of the domestic fuel price hike in May. However, it failed to fillip domestic sentiments as marketmen speculated that the reading may be insufficient for the RBI to pause its liquidity tightening measures as the moderation in the rate of price rise seemed largely insignificant. On the global front, Asian markets were trading in red barring Nikkei 225 and Seoul Composite while the European markets were trading in red on pessimistic note ahead of a meeting between French and German leaders to discuss the European debt crisis. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,100 and 16,900 levels, respectively. The market breadth on the BSE was negative in the ratio of 974:1718 while, 96 scrips remained unchanged.

The BSE Sensex is currently trading at 16,839.63 down by 1.96 points or 0.01% after trading as high as 17,035.49 and as low as 16,825.71. There were 14 stocks advancing against 16 declines on the index.

The broader indices were trading on a weak note; the BSE Mid cap index slipped 1.24% while Small cap shed 1.13% respectively. 

On the BSE sectoral space, IT up 0.93%, TECk up 0.88%, Capital Goods up 0.55% and FMCG up 0.30% were the major gainers while Realty down 3.47%, Metal down 1.34%, Health Care down 0.58%, Bankex down 0.51% and Power down 0.40% were the top loser on the index.

BHEL up 2.26%, Bharti Airtel up 2.12%, TCS up 2.02%, Coal India up 1.61% and L&T up 0.99% were major gainers on the Sensex, while JP Associates down by 4.44%, Hindalco down 3.31%, DLF down 3.19%, HDFC down 2.17% and Cipla down 1.84% were the major losers on the index.

Meanwhile, India’s Headline Inflation measured by Wholesale Price Index (WPI) rose to 9.22% in July, which is just below the June’s 9.44%. The plunge in inflation on monthly basis is due to moderation in food inflation, fuel and power inflation, however, the manicured products segment of WPI, surged to 7.49% in July from 7.43% in June. The government also revised upward the headline inflation data for the month of May to 9.56% from 9.06%. This was the second revision of inflation data in the current financial year. In its last revision the government had increased the inflation data for the April from 8.66% to 9.74%  

According to the data released by the ministry of commerce and industry, the Wholesale Price Index for 'All Commodities' (Base: 2004-05 = 100) for the month July, 2011 rose by 0.7% to 154.0 (Provisional) from 153.0 (Provisional) for the previous month. The annual rate of inflation, based on monthly WPI, stood at 9.22% (Provisional) for the month of July, 2011 (over July, 2010) as compared to 9.44% (Provisional) for the previous month and 9.98% during the corresponding month of the previous year. Build up inflation in the financial year so far was 3.01% compared to a buildup of 3.45% in the corresponding period of the previous year.

On monthly basis, the index for Primary Articles group rose by 0.2 percent to 197.9 (Provisional) from 197.5 (Provisional) for the previous month. The index for ‘Food Articles’ group rose by 1.4 percent to 192.8 (Provisional) from 190.1 (Provisional) for the previous month due to higher prices of coffee (15%), gram (8%), fish-inland (7%), ragi (6%), mutton (4%), fruits & vegetables (3%), barley, bajra and rice (2% each) and wheat (1%).  However, the prices of condiments & spices (3%), urad, egg and arhar (2% each) and poultry chicken, masur and tea (1%) declined.

The index for ‘Non-Food Articles’ group declined by 3.0% to 175.8 (Provisional) from 181.3 (Provisional) for the previous month due to lower prices of raw cotton (12%), flowers (7%),  raw rubber (6%), copra (4%), soyabean and mesta (3% each) and raw jute (2%). However, the prices of gaur seed (20%), niger seed (16%), linseed (11%), coir fibre (8%), sunflower (6%), gingelly seed (5%), safflower (4%), castor seed (3%) and rape & mustard seed, cotton seed, groundnut seed and raw silk (1% each) moved up.

The index for ‘Minerals’ group declined by 1.5% to 307.7 (Provisional) from 312.5 (Provisional) for the previous month due to lower prices of zinc concentrate (28%), limestone (7%), barytes (5%), steatite and iron ore (4% each) and sillimanite and crude petroleum (1% each).  However, the prices of bauxite (7%), magnesite (5%), chromite (4%) and copper ore (3%) moved up.

The index for the Fuel and Power rose by 2.5% to 165.6 (Provisional) from 161.6 (Provisional) for the previous month due to higher prices of kerosene (13%), LPG (11%) and high speed diesel (7%).  However, the prices of bitumen (6%), furnace oil (4%), naphtha and light diesel oil (3% each) and aviation turbine fuel (2%) declined.

The index for Manufactured Products rose marginally by 0.3% to 137.7 (Provisional) from 137.3 (Provisional) for the previous month. Under this major group, products such as ‘Food Products, ‘Beverages, Tobacco & Tobacco Products’, 'Wood & Wood Products', 'Transport, Equipment & Parts products,  'Rubber & Plastic Products’, and Paper & Paper Products' group, registered growth in prices for the month of June. However, products like 'Textiles' group and Machinery & Machine Tools’ showed decline in prices for June.

The surge in manufacturing inflation in July is alarming. It has been above 7.4% since May 2011. Which indicated that the Reserve Bank of India (RBI) is expected to maintain its anti inflationary monetary policy stance and it is most likely to go for 12th in row on 16 September. Since March 2010 RBI has increased it key policy rates 11 times. 

In the Independence Day speech Prime Minister Dr. Manmohan Singh had expressed his concern over the price scenario. Prime Minister said 'Our country is passing through a phase of sustained high inflation. Controlling rising prices is a primary responsibility of any government. By adding further Prime Minister said 'I wish to assure you today that we are continuously monitoring the situation to find out what new steps can be taken to arrest rising prices. Finding a solution to this problem will be our top-most priority in the coming months.'

The S&P CNX Nifty is currently trading at 5,068.05, lower by 4.90 points or 0.10% after trading as high as 5,132.20 and as low as 5,064.70. There were 20 stocks advancing against 30 declines on the index.

The top gainers of the Nifty were TCS up 2.49%, BHEL up by 2.39%, Bharti Airtel up 2.18%, HCL Tech up 1.63% and Dr. Reddy’s up 1.62%.

JP Associates down 5.48%, Reliance Capital down 4.73%, SAIL down 3.80%, DLF down 3.65% and Hindalco down 3.56% were the major losers on the index.

Asian markets traded on a mixed note, Shanghai Composite plunged 0.71%, Hang Seng shed 0.24%, Straits Times slipped 1.48%, Jakarta Composite shed 0.18%, KLSE Composite inched down 0.10% and Taiwan Weighted sank 0.27%. On the other hand, Nikkei 225 rose 0.23% and Seoul Composite rocketed 4.83%.

The European markets were trading in red with, France’s CAC 40 eased 1.92%, Germany's DAX shed 2.40% and London’s FTSE slipped 1.36%.