Benchmarks magnify gains on rate cut hopes; rate sensitive’s lead

Gaining strength brick by brick, benchmark equity indices have surged to near their intra-day high, as hopes that RBI could go for rate cut in its upcoming monetary policy review on December 18, injecting strength in the already active bulls at D-street. Registering it’s second month of decline, the wholesale price index (WPI), India's main inflation gauge, unexpectedly cooled down to 7.24% (Provisional) for the month of November, 2012 as compared to 7.45% for the October and 9.46% during the corresponding month of the previous year.

In the optimistic session of trade, Sensex, scooping close to half a percent gain, is trading  above the psychological 19300 level, while the 50 share index, Nifty, too adding over similar gains, is trading over 5850 crucial bastion. Broader indices too are trading on a sanguine note.

On the global front, Asian pacific shares are mostly trading in negative territory on concerns that US lawmakers are still too far to avert a fiscal crisis with looming end-of-year deadline. Additionally, Europe's main stock indexes are expected to open on positive note on Friday, as improved manufacturing data from China may offset worries about US budget talks. The HSBC flash purchasing managers' index for December rose to 50.9, a 14-month high and the fifth straight monthly gain.

Closer home, although buying witnessed was broad based, stocks from Consumer Durable and Power counters, are performing exceptional to the trend. Stocks from rate sensitive, Realty, Banking along with Metal and Oil & Gas counters, are endorsing bourses strength. In other stock-specific action, fertilizers stocks, viz, Rashtriya Chemicals Fertilizers, National Fertilizers, Gujarat State Fertilisers, have been on buyer’s radar after the Cabinet Committee on Economic Affairs (CCEA) approved the long pending urea investment policy that will incentives setting up of new fertiliser plants and expansion of existing ones. Further, Capital goods stocks, namely, Larsen & Toubro, Jaiprakash Assocaties and Punj Lloyd were on the gaining spree after cabinet approved the creation of a special panel on Thursday to speed up the implementation of big-ticket infrastructure projects. Additionally, Telecom stocks, barring Bharti Airtel, were trading optimistic after Country’s federal cabinet on Thursday approved a renewed push to sell telecommunications bandwidth, after a muted response to an auction held in November left four key zones unsold, with the auction's starting prices being slashed by 30% for the Delhi, Mumbai, Karnataka and Rajasthan service areas in the 1,800 MHz category. The overall market breadth on BSE is in the favour of advances which have thumped declines in the ratio of 1343:1207, while 114 shares remained unchanged.

The BSE Sensex is currently trading at 19311.87 up by 82.61 points or 0.43% after trading in a range of 19348.85 and 19193.11. There were 18 stocks advancing against 12 declines on the index and one remain unchanged.

The broader indices too added traction; the BSE Mid cap and Small cap indices were trading higher by 0.55% and 0.15% respectively.

The top gaining sectoral indices on the BSE were, Realty up by 1.37%, Bankex up by 1.00%, Metal up by 0.85%, Oil & Gas up by 0.65% and Auto up by 0.60%. On the other hand, CD down by 0.91% and Power down by 0.22% were the losers on the Sensex.

The top gainers on the Sensex were SBI up by 2.26%, Tata Motors up by 1.84%, Sterlite Industries up by 1.56%,  Jindal Steel up by 1.46% and ICICI Bank up by 1.26%On the flip side, Bharti Airtel down by 1.28%, ONGC down by 0.61%, Maruti Suzuki down by 0.60%,  BHEL down by 0.59% and Hero MotoCorp was down by 0.55% were the top losers on the Sensex.

Meanwhile, after rising to the highest level in the year for the month of September, the wholesale price index (WPI), India's main inflation gauge, in a big relief, unexpectedly cooled down to 7.24% (Provisional) for the month of November, 2012 as compared to 7.45% for October and 9.46% during the corresponding month of the previous year, thereby registering second consecutive decline. However, the annual reading for the month of September was revised sharply higher to 8.07% from earlier of 7.81%.

Re-igniting the hopes of rate-cut from Reserve Bank of India (RBI), in its upcoming monetary policy review on December 18, 2012, the figures were way below the consensus estimates of 7.6% figure for the month of November. Build up inflation in the financial year so far was 4.84% compared to a buildup of 5.28% in the corresponding period of the previous year.

The pleasant surprise came in from the index for Manufactured Products, which carries weight of almost 65% in the index, which rose tad by 0.1% to 148.0 from 147.9 for the previous month. The index for ‘Food Articles’ group rose by 0.6% to 166.7 from 166.7 in the previous month.

Meanwhile, the index for primary articles group, which has a weightage of 20.12% in overall WPI and includes food, non-food and minerals group too rose by 0.3% to 220.8 from 220.2 for the previous month. The index for ‘Food Articles’ group rose by 0.3% to 213.2 from 212.5 in the previous month, while, the index for ‘Non Food Articles’ group rose by 1.8% at 201.3 (Provisional) from 197.7 (Provisional) for the previous month. However, the index for ‘Minerals’ group declined by 2.4% to 347.1 (Provisional) from 355.8 (Provisional) for the previous month.

Indian economy is headed for the weakest full-year growth in a decade, at about 6%, far below the near double-digit pace before the global economic downturn. But despite the slowdown, the Reserve Bank of India (RBI) has been hesitant to lower rates since April because of above the comfort level inflation of nearly seven percent, worsened by a weak rupee that has added to the cost of fuel imports.

However, this time around, an unexpected drop in inflation figure strengthens the case for RBI to go for rate cut in its upcoming monetary policy meet, with just ‘CRR’ cut case too not being ruled out by some economist. However, this could be followed by rate cut in RBI’s monetary policy in January, as with the given apex bank’s conservative approach, Reserve Bank of India Governor Duvvuri Subbarao may wait for more evidence that inflation is on an easing trend before heeding Finance Minister Palaniappan Chidambaram’s call for cheaper credit to back a government policy overhaul. Furthermore, adding to the positive’s, core inflation rate, which the RBI holds as key to its rate decisions, also declined to 4.5% for the month of November against the figure of 5.6% in September and 5.2% in October.

The S&P CNX Nifty is currently trading at 5,877.55 up by 26.05 points or 0.45% after trading in a range of 5,886.10 and 5,839.15. There were 31 stocks advancing against 19 declines on the index.

The top gainers of the Nifty were, SBI up by 2.23%, Bank of Baroda up by 1.90%, IDFC up by 1.71%, Sesa Goa up by 1.68% and Tata Motors up by 1.65%.

On the flip side, Bharti Airtel down by 1.83%, Power Grid down by 1.82%, Ambuja Cement down by 0.99% Siemens down by 0.95% and Hero MotoCorp down by 0.83% were the top losers on the index.

Most of Asian markets were trading negative; with exception being, Shanghai Composite up by 3.98%, Hang Seng up by 0.62% and Straits Times was up by 0.16%. While, Jakarta Composite was down by 0.68%, KLSE Composite was down by 0.16%, Nikkei 225 was down by 0.05%, Seoul Composite was down by 0.39% and Taiwan Weighted down by 0.75%.