Benchmarks continue to consolidate for eighth straight session

Mood of consolidation extended to the eighth straight day for the Indian markets. Frontline indices, despite some early leads on Wednesday, failed to capitalize and ended the session slightly in the red, as better-than-expected Index of Industrial Production (IIP) data for the month of October dashed expectations of rate cut from the Reserve Bank of India (RBI) in its upcoming policy meet on December 18, 2012. Industrial production growth rate bounced back to a 16-month high of 8.2% in October on good performance of the manufacturing, power sector and higher output of capital as well as consumer goods, indicating sudden recovery in the economy. The factory output, as measured by the Index of Industrial Production (IIP), contracted by 5% in October last year. The IIP had expanded by 9.5% in June 2011.

Higher consumer price inflation (CPI) too dampened the investors’ sentiments as likely hood of a rate cut in forthcoming mid-quarter monetary policy review got lower. November 2012 CPI inflation number showed that the retail inflation is again trending towards double digit to 9.90 per cent in November 2012 as compared to 9.75 per cent in October 2012. Now all eyes would be on the wholesale price index (WPI) for November 2012, which is due on December 14, 2012. Some amount of selling was also witnessed after banking space took U-turn as both Houses of Parliament were adjourned before taking up the Banking Amendment Bill. The Banking Amendment Bill entails easing voting rules of shareholders in banks to attract foreign investment and allows the central bank more powers.

However, global cues remained firm and helped the domestic markets to limit their losses as all the Asian equity indices ended the session in the green as strong overnight performances in global equities and firmer economic sentiment in Germany buoyed sentiment, while the dollar was pressured ahead of the outcome of the US Federal Reserve’s policy meeting later in the day. Moreover, European counters too traded firmly in the early deals as investors bet the US Federal Reserve will unveil a new round of bond buying in a bid to support the economy.

Back home, stocks from Capital Goods, Public Sector Undertaking (PSU) and Metal counters witnessing nasty laceration, went home with loss of over half a percent. Downfall was also supported by fall in shares of three public sector oil marketing companies, as the government is considering raising the cap on the number of subsidised LPG cylinders available to households to nine per year. However, the losses remained capped as Software pack showed some traction amid sustained optimism for an agreement on upcoming US tax hikes and spending cuts, ahead of the conclusion of a Federal Open Market Committee that may see it undertake more asset buying. Moreover, shares of non-banking financial companies gained on hopes that parliament will pass the banking amendment bill after Finance Minister P. Chidambaram said the government has reached an agreement with the opposition.

The NSE’s 50-share broadly followed index Nifty declined by ten points to end below its psychological 5,900 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over thirty points to finish below the psychological 19,400 mark. However, broader markets outperformed benchmarks and snapped the session in the positive terrain.

The overall volumes stood above Rs 1.80 lakh crore, which remained on the lower side as compared to that on Tuesday. The market breadth remained in favor of declines as there were 1,431 shares on the gaining side against 1,498 shares on the losing side while 139 shares remain unchanged.

Finally, the BSE Sensex lost 31.88 points or 0.16% to settle at 19355.26, while the S&P CNX Nifty declined by 10.80 points or 0.18% to end at 5,888.00.

The BSE Sensex touched a high and a low of 19478.79 and 19317.23, respectively. The BSE Mid-cap index was up by 0.06% and Small-cap index was up by 0.24%.

Bajaj Auto up 2.57%, Mahindra & Mahindra up by 2.20%, Hero MotoCorp up 1.92%, Reliance up 1.53% and Sun Pharma up 1.35%, while, Hindustan Unilever down by 2.65%, BHEL down by 1.98%, GAIL down by 1.67%, Jindal Steel down by 1.55% and ONGC down by 1.44% were the top losers on the index.

On the BSE Sectoral front, Consumer Durables (CD) up 0.95%, Auto up 0.94%, IT up 0.38%, TECk up 0.34% and Oil & Gas up 0.31% were top gainers, while Capital Goods (CG) down by 0.99%, PSU down by 0.81%, Metal down by 0.71%, Power down by 0.65% and Bankex down by 0.32% were the top losers in the space.

Meanwhile, the government is planning to raise the cap on the number of subsidized LPG cylinders to nine per household in a year. Oil minister Veerappa Moily seemed worried of a political backlash on the decision to limit the supply of subsidized LPG to just six cylinders per household annually and has asked the Finance Minister P Chidambaram to modify the government’s earlier decision on subsidized LPG cylinders.

Moily said that “I think it should go up, definitely from six cylinders to nine cylinders and decision to raise the cap will be taken by the Cabinet very shortly”.

As per the September 13 decision, any requirement beyond six subsidized LPG cylinders annually will cost the market rate of Rs 931 per cylinder from subsidized rate of Rs 410.50 per cylinder. Only 44 percent of households in the country consume six cylinders in a year, while the majority consumes 9-12 cylinders.

However, the government will have to bear extra burden of Rs 9,000 crore annually to provide an additional subsidy if the cap is raised to nine cylinders.

The S&P CNX Nifty touched a high and a low of 5,924.60 and 5,874.25 respectively.

The top gainers on the Nifty were M&M was up 2.18%, Bajaj Auto up 1.96%, Hero MotoCorp up 1.93%, Reliance up 1.58% and IDFC was up 1.55%.

The top losers on the index were HUL down by 2.96%, BHEL down by 2.34%, Grasim down by 2.22%, Jindal Steel down by 2.13% and HDFC down by 1.89%.

The European markets were trading mixed, France’s CAC 40 down by 0.06%, Germany’s DAX up 0.30% and the United Kingdom’s FTSE 100 up by 0.25%.

Tracking positive global markets, Asian shares ended higher on Wednesday amid hopes of a deal from US budget talks. Meanwhile, investors were expecting more stimulus measures from the Federal Reserve, when it ends its two-day policy meeting later in the day. Chinese markets went home with green mark ahead of annual Central Economic Work Conference, while Hong Kong’s market closed higher after hovering around a fresh 16-month high, as city's biggest mover Guoco Corp. was surged by 30.6%. Moreover, Japan’s Nikkei ended higher as some exporters supported by a weaker yen, while South Korea's Kospi closed shutter with green mark, after its largest constituent, Samsung Electronics continued to gain after rising 5.0% month on Tuesday.