Indian markets extend consolidation ahead of December inflation data

Extending their consolidation mood, key domestic benchmarks ended the volatile session on a flat note on Friday as investors opted to trade cautiously ahead of December inflation data scheduled next week which is likely to decide the stance of Reserve Bank of India’s monetary policy on January 29. Both the gauges traded firm during the early part of the day supported by shares of information technology (IT) companies, which remained on buyers’ radar after Infosys reported a better-than-expected net profit for the third quarter ended December 2012 and upped its full year guidance. Infosys rallied about 17 percent, its sharpest single day gain in past one decade on the Bombay Stock Exchange (BSE). Tata Consultancy Services (TCS), Wipro, Mahindra Satyam, Hexaware Technologies, CMC and Tech Mahindra too edged higher by 2-4 percent.

However, gains remain capped on growth recovery concerns in Asia’s third-biggest economy after weaker-than-expected November industrial output. India’s index of industrial production (IIP), measuring output at factories, mines and utilities, contracted by 0.1 percent in November following a revised 8.3 percent  rise in October. Meanwhile, India's trade deficit lessened to $17.7 billion in December from $19.3 billion in recorded November 2012. Exports fell 1.9% year-on-year to $24.88 billion in December, whereas improved when compared to $22.3 billion recorded in November 2012. Selling got intensified on the street as India’s trade deficit in December widened due to an increase in imports, mainly of crude oil. The trade gap increased to $17.7 billion in December from $14.7 billion a year earlier, but narrowed from $19.3 billion in November.

Global cues too remained sluggish as most of the Asian equities ended in red on Friday barring Japanese stocks ending higher for the ninth consecutive week, the market's longest consecutive weekly climb since in 1988, as the yen weakened after Japan announced a larger-than-expected trade deficit, while Chinese stocks dropped after a pick-up in inflation. The yen weakened after Japan announced that its current account fell into a deficit of Y222.4 billion in November, much wider than the Y33.5 billion shortfall forecast by economists. Meanwhile, European shares edged lower in the early deal but stayed close to near two-year highs, with fall in basic resources stocks on concerns about faltering monetary stimulus from China offsetting gains in tech shares.

Back home, the sentiments also got dampened after C Rangarajan commented that country’s headline inflation may miss the expected 7 percent-mark by this fiscal-end if the government goes ahead with increasing administered prices of diesel. Selling in rate sensitive too dragged the markets into the red. Sectors like, Auto, Realty and Banking all declined by over a percent ahead of Reserve Bank of India’s monetary policy on January 29.

The NSE’s 50-share broadly followed index Nifty declined by over fifteen points but managed to end above the psychological 5,950 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex ended flat below the psychological 19,700 mark. However, broader markets butchered badly and snapped the session with a cut of about one and a half percent. The market breadth remained in favor of declines as there were 982 shares on the gaining side against 1,964 shares on the losing side while 132 shares remain unchanged.

Finally, the BSE Sensex rose 0.09 points to settle at 19,663.64, while the S&P CNX Nifty declined by 17.35 points or 0.29% to end at 5,951.30.

The BSE Sensex touched a high and a low of 19,839.80 and 19,619.83, respectively. The BSE Mid-cap index was down by 1.49% and Small-cap index ended lower by 1.58%.

The top gainers on the Sensex were, Infosys up by 16.90%, Wipro up by 6.10%, TCS up by 3.80% and Sterlite Industries up by 1.17%, while, Jindal Steel down by 3.53%, Hindustan Unilever down by 3.51%, ONGC down by 3.28%, Mahindra & Mahindra down 2.83% and ITC down by 2.63% were the top losers on the index.

The top gainers on the BSE Sectoral space were IT up by 9.34%, TECk up by 6.57% and Consumer Durables (CD) up by 0.21%, while FMCG down 2.47%, Realty down 1.89%, PSU down 1.74%, Power down 1.72% and Oil & Gas down 1.67% were top losers on the sectoral space.

Meanwhile, despite exports declining for eighth consecutive month, India's trade deficit lessened to $17.7 billion in December from $19.3 billion in recorded November 2012. Exports fell 1.9% year-on-year to $24.88 billion in December, whereas improved when compared to $22.3 billion recorded in November 2012.

Imports, however, rose 6.3% at $42.5 billion as against $41.5 billion witnessed in November. For the first three quarters of the fiscal year ending in March, exports totaled $214.1 billion, down 5.5% from a year ago.

Steeper decline in exports than that in imports, which makes up one-fifth of the Indian economy, has enlarged current account deficit (CAD) that hit an all time high of 5.4% of gross domestic product in the July-September quarter. India’s huge trade and current account deficits have already put pressure on the rupee in the past many months.

The S&P CNX Nifty touched a high and a low of 6,018.85 and 5,940.60 respectively.

The top gainers on the Nifty were Infosys up by 17.04%, Wipro up by 6.17%, TCS up by 3.77%, HCL Tech up by 0.51% and Lupin up by 0.50%.

The top losers of the index were HUL down by 4.08%, Jindal Steel down by 4.04%, JP Associates down by 3.93%, Kotak Bank down by 3.80% and ONGC down by 3.62%.

The European markets were trading in red, France’s CAC 40 down by 0.43%, Germany’s DAX down by 0.01% and the United Kingdom’s FTSE 100 down by 0.02%.

Asian markets ended mostly lower on last trading day of the week due to increase in Chinese inflation, which rose at 2.5% in December from a year earlier, quicker than November's 2.0% rise. Japan’s Nikkei went home with green mark after touching a fresh 22-month high, as the yen weakened after Japan announced a larger-than-expected trade deficit. Meanwhile, South Korean market closed lower as the central bank kept key interest rate unchanged and cut its forecast for the country’s economic growth this year on the back of slower corporate investment and uncertainties about the global economy. Also, the auto makers were dragged the market down, as the lower yen raised the threat from Japanese rivals.