Markets overlook sluggish August inflation figures; continue to celebrate QE3, diesel price hike

Indian equity markets are caught in bull grip, which have held the fort upright tight even after the release of shockingly higher August month’s WPI data, which has confirmed the case of central bank’s anti-inflationary stance during its next mid-quarterly policy review on September 17, 2012. Fed launched QE3 and domestically diesel price hike by Rs 5/ litre, has mainly provided shot of adrenaline to Indian equity markets, which now appear on their way of clocking eight consecutive session of gains. Thus, amassing gains of over two percent, barometer index of BSE, Sensex, is close to claiming the 18400 mark, while 50 share index, Nifty, on NSE, too puffing up over century of points, is oscillating above the 5,550 crucial level. The broader indices, however, have pared some of their gains.

On the global front, the launch of a new monetary stimulus programme from the U.S. Federal Reserve in its latest attempt to drive growth in the world's largest economy has mainly drove the European markets to 14 months, just in the start of the trade. Further, with no surprises Asian markets too are trading on sanguine note. After the European closing bell on Thursday, the Fed said it would pump $40 billion into the U.S. economy each month until it saw a sustained upturn in the weak jobs market.

Closer home, stocks of Realty, Bankex and Metal counters are among shining stars on BSE sectoral front, while stocks from defensive Healthcare counters have emerged as the only spoil sport. Much of the limelight is being hogged by PSU OMCs stocks, which have rallied on government decision of hiking diesel prices by Rs 5/litre. Moreover, Aviation stocks too are seen buzzing ahead of cabinet meet for deciding on FDI in the sector. The overall market breadth on BSE is in the favour of advances which have outnumbered declines in the ratio of 1471:1186, while 122 shares remained unchanged.

The BSE Sensex is currently trading at 18,386.18 up by 365.02 points or 2.03% after touching a high of 18,456.33 and low of 18,284.75. 28 stocks were on advancing side, while 2 stocks were on declining side of 30 share index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.89% and Small cap index was up by 0.73%.

The top gaining sectoral indices on the BSE were, Realty up by 4.27%, Metal up by 3.67%, Bankex up by 3.58%, Capital Goods up by 2.73% and Auto up by 2.69%. While, Health Care down by 0.36% was the only loser on the index.

The top gainers on the Sensex were Hindalco Industries up by 7.13%, Jindal Steel up by 6.05%, ICICI Bank up by 5.20%, Sterlite Industries up by 4.56% and SBI up by 4.26%. While TCS down by 0.51%, Sun Pharmaceuticals down by 0.02% remained the only losers on the Sensex.

Meanwhile, adding to the hardships of policy makers, the wholesale price index (WPI), India's main inflation gauge, shockingly rose at 7.55% for the month of August, as compared to 6.87% (Provisional) for the previous month and 9.78% during the corresponding month of the previous year.

The much awaited figure was worse than the consensus estimates of 7.06%. Meanwhile, build up inflation in the financial year so far was 3.48% compared to a build-up of 3.61% in the corresponding period of the previous year. Moreover, the annual reading for the month of June was revised sharply higher to 7.58% from earlier of 7.25%. The index for Manufactured Products, which carries weight of almost 65% in the index, rose by 0.8% to 146.9 from 145.7 for the previous month. The index for ‘Food Articles’ group rising by 3% to 164.5 from 159.7 in the previous month, continued driving the headline inflation higher.

Meanwhile, the index for primary articles group, which has a weightage of 20.12% in overall WPI and includes food, non-food and minerals groups rose 0.3% to 219.5 from 218.8 for the previous month. The index for ‘Non Food Articles’ group rose by 3.8% to 206.8 from 199.2 in the previous month. Meanwhile, the index for ‘Food Articles’ group eased by 0.4% at 211.4 (Provisional) from 212.2 (Provisional) for the previous month. However, the index for ‘Minerals’ group declined by 1.3% to 331.3 (Provisional) from 335.8 (Provisional) for the previous month.

Moreover, the index for fuel and power group with a weightage of 14.91% in index too spurted by 3.1% to 181.0 from 175.5, due to higher prices of electricity (agricultural) (23%), electricity (industry) (11%), electricity (domestic) (9 %), electricity (railway traction) (8%),  light diesel oil (7%), electricity (commercial) and naphtha (6%each), aviation turbine fuel (5%), furnace oil (4%), kerosene (2%) and petrol (1%).

Inflation staying above 7% mark for almost two-and-half-years by now, has limited RBI’s abilities of easing monetary policy too aggressively despite the slide in economic growth to a three year low in June quarter.  Further, the worse than expected inflation figures confirms the case of world’s most aggressive central bank’s prolonging anti-inflationary stance during its next mid-quarterly policy review on September 17, 2012, as trend for inflation continues to remain on the upside.

The S&P CNX Nifty is currently trading at 5,556.00, up by 120.65 points or 2.22% after trading in a range of 5,564.05 and 5,526.95. There were 43 stocks advancing against 7 declining one’s on the index.

The top gainers of the Nifty were Hindalco up by 7.21%, DLF up by 6.53%, Jindal Steel up by 6.26%, JP Associates up by 5.57% and Bank of Baroda up by 5.38%.

On the flip side, TCS down by 0.68%, Power Grid down by 0.66%, HCL Tech down by 0.53%, NTPC down by 0.12% and BPCL down by 0.06% remained the only losers on the index.

All the Asian equity indices were trading in the green; Shanghai Composite rose 0.84%, Hang Seng index spurted 2.84%, Jakarta Composite surged 2.22%, KLSE Composite advanced 0.69%, Nikkei 225 rose 1.83%, Strait Times added 1.21%, Kospi Composite Index soared higher by 2.92% and Taiwan Weighted too amassed gains of 2.10%.

European markets have got to a good start, with CAC 40 trading higher by 1.73%, DAX adding 1.30% and FTSE 100 adding 1.23%.