Better inflation data gets washed out by weak SBI numbers

Thursday proved a big let-down for the markets despite the inflation figures slumping to three years low. The trade remained choppy and the traders remain concerned about the future outlook of the market as the near term trigger of inflation failed to provide any help. Markets got a flat but a positive start on supportive cues from the regional peers and the trade remained cautious ahead of the WPI inflation numbers. But the second half of trade dragged the markets below the crucial support levels of 5,900 (Nifty) and 19,500 (Sensex).

On the global front, most of the Asian markets looked in fine fettle from the beginning, Japanese market too moved higher ahead of the conclusion of a two-day Bank of Japan policy meeting. The unexpected decline in Japan’s GDP to an annualized 0.4 percent bolstered Prime Minister Shinzo Abe’s case for more monetary stimulus to end deflation. The early green start of the European markets gave a sense of support to the domestic markets but latter decline kept the domestic market’s recovery in check.

Back home, the markets could not capitalize the much awaited soothing report of a decline in headline inflation numbers for January.  The wholesale price index (WPI) inflation gauge, cooled down to more than three year low at 6.62% (Provisional) for the month of January, 2013 as compared to 7.18% for December and 7.23% during the corresponding month of the previous year. Build up inflation in the financial year so far too dropped significantly to 5.09% compared to a build-up of 6.15% in the corresponding period of the previous year. The markets got spooked by the sluggish Q3 performance of the largest PSU lender State Bank of India (SBI). The bank posted a 4 percent rise in quarterly net profit, its smallest increase in six quarters, the net profit of the bank was Rs 4648.44 crore compared to Rs 4318.08 crore in the same quarter last year. While the provisioning and NPAs of the bank increased, its net interest income declined during the quarter. The other earnings disappointment came in from Dr Reddy's Laboratories whose net dipped by 29% to Rs 363 crore for the third quarter ended December 31, 2012.

After the slump in the latter half of trade, markets showed little resistance lacking any supportive cues and slumped as selling intensified on concern of earnings disappointment, ending near the lowest point of the day. Broader indices were hit harder, losing over one and half a percent. On sectoral front Capital Goods was the major laggard, down by around two and half a percent, followed by Oil & Gas, Auto and Realty and Power.

Finally, the BSE Sensex lost 110.90 points or 0.57% to settle at 19,497.18, while the S&P CNX Nifty declined by 36.00 points or 0.61% to end at 5,896.95.

The BSE Sensex touched a high and a low of 19,639.83 and 19,444.33, respectively. The BSE Mid cap index down by 1.43% and Small cap index was down by 1.86%.

The top gainers on the Sensex were, Hindustan Unilever up by 2.24%, GAIL up by 1.97%, HDFC Bank up by 1.65%, Tata Steel up by 1.17% and TCS up by 1.15%, while Bharti Airtel down by 4.02%, Wipro down by 3.33%, Maruti Suzuki down by 3.30%, L&T down 2.72% and Reliance down by 2.63% were the top losers on the index.

The top gainers on the BSE Sectoral space were, FMCG up 0.44%, IT up 0.27% and Metal up 0.04%, while Capital Goods down 2.27%, Oil & Gas down 1.59%, Auto down 1.49%, Power down 1.25% and Realty down 1.21% were top losers on the sectoral space.

Meanwhile, though the latest foreign trade data, which shows exports moved out of the negative zone in January 2013 after eight straight months of decline, posting a meagre growth of 0.82% at $25.58 billion, India Inc. believes that the slow-down in shipments still remains a cause for concern and the government needs to continue its support.

As per ASSOCHAM, the worrying factor is that the country’s trade deficit is widening due to import of oil and gold rather than import of capital goods. It has suggested that the government should review the implementation of its industrial and trade policies to boost exports and industrial performance. The industry body also expressed serious concerns over trade balance and said that the deteriorating trade balance has been the main culprit behind pushing the current account deficit to unsustainable levels.

According to CII National Committee on Exports & Imports Chairman Sanjay Budhia, the marginal growth in the January export growth shows that exports are slowly and steadily gaining momentum and continuation of this trend will help contain the trade deficit. He added that the government should extend two per cent Interest Subvention Scheme to all sectors for exports to make it more competitive with their counterparts. The industries are eagerly expecting the announcement of revamped 100 percent SEZ and EOU schemes.

Moreover, the Federation of Indian Export Organisations also recommended the government to support high-technology exports which account less than nine per cent to total exports. Regarding the shares of technology exports in Asian countries, it stated that in Singapore and the Philippines the share of tech exports is over 50 per cent, while, for Malaysia, it account for 45 per cent of the country’s exports.

The S&P CNX Nifty touched a high and a low of 5,940.20 and 5,884.55 respectively.

The top gainers on the Nifty were GAIL up by 2.12%, HUL up by 1.69%, Tata Steel up by 1.49%, HDFC Bank up by 1.47% and Asian Paints up by 1.27%.

The top losers of the index were Siemens down by 4.92%, Bharti Airtel down by 4.40%, BPCL down by 4.16%, PowerGrid down by 3.55% and Maruti down by 3.51%.

The European markets were trading in red, France’s CAC 40 down by 0.52%, United Kingdom’s FTSE 100 down by 0.54% and Germany’s DAX down by 1.06%.

Most Asian markets ended higher on Thursday, with investors looking ahead to an upcoming G20 meeting. Hong Kong stocks closed with strong gains on the first trading day in the year after three days of public holidays held to celebrate the Lunar New Year. Japan’s Nikkei went home with green mark as the yen retreated again after posting strong gains on Wednesday, while there was little reaction to Bank of Japan’s move to left its monetary policy steady.

Markets in mainland China and Taiwan remained closed for public holiday.