Benchmarks continue firm trade ahead of F&O expiry

Indian equity indices are trading ahead of F&O series expiry despite discouraging weekly inflation reading which showed that food and fuel inflation jumped to 9.13% and 14.69% for the week ended September 17 from 8.84% and 13.69% in the previous week, respectively. The acceleration in inflation shows persistently high inflationary pressures on the economy which may prompt the RBI to extend its aggressive monetary tightening measures. Market participants were seen piling up the positions in Auto, IT and FMCG sector while selling was witnessed in Capital Goods, Consumer Durables and Health Care sector. Stocks like Tilak Finance, JSL Industries, Banas Finance, Hindoostan Mills, Santowin Corporation, Vesuvius India, Super Corp, Esaar India, PFL Infotech, Gallantt Ispat and Rushil Décor hit new high while stocks like MTNL, Dishman Pharma, Great Offshore, Tanla Solutions, Indowind Energy, IndiaBulls Power, DB Corp, MOIL, Nitesh Estate, DB Realty and Brooks Laboratories hit new low. PG Electroplast is trading weak on reports that the market regulator Securities and Exchange Board of India is probing alleged price rigging in the share price of the company.

In other scrip specific development, Kingfisher Airlines is in red after the company's chairman Vijay Mallya stated yesterday that the airline will end its low-cost flights in four months. Tulip Telecom is firm on reports that the telecom tribunal has stayed Department of Telecommunication's decision to reject Qualcomm India's application for obtaining broadband service permits. Sterling Holiday Resorts (India) is trading firm at upper circuit on reports that investors Rakesh Jhunjhunwala and Radhakrishna Damani have invested around Rs 40 crore each for a 7.1% stake each in the firm in the past 2 months. Tourism Finance Corporation of India (TFCI) is trading in green after IFCI increased its stake in TFCI to 41.5% from 39.4%.
On the global front, Asian markets were trading in green barring Shanghai Composite while the European markets were trading in mix.  The German parliament is set to vote today on expanding the 440 billion euro ($596 billion) European Financial Stability Facility's powers to recapitalize banks and lend to troubled countries. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 4,950 and 16,500 levels, respectively. The market breadth on the BSE was negative in the ratio of 1116:1508 while, 110 scrips remained unchanged.

The BSE Sensex is currently trading at 16,568.45 up by 122.43 points or 0.74% after trading as high as 16,598.94 and as low as 16,316.66. There were 20 stocks advancing against 10 declines on the index.  The broader indices were trading on a weak note; the BSE Mid cap index eased 0.44% while Small cap shed 0.30%.

On the BSE sectoral space, Auto up 1.89%, IT up 1.29%, FMCG up 1.07%, TECk up 0.79% and Bankex up by 0.73% were the major gainers while Capital Goods down 1.50%, Consumer Durables down 1.48%, Health Care down 0.48%, Metal down 0.44% and Realty down 0.34% were the only losers in the space.

JP Associates up 5.43%, HDFC Bank up 3.25%, Tata Motors up 2.69%, ONGC up 2.63% and M&M up 2.44% were the major gainers on the Sensex, while L&T down 3.10%, Coal India down 1.83%, SBI down 1.65%, Sterlite Industries down 1.58% and DLF down 1.03% were the major losers on the index.

Meanwhile, India’s weekly food inflation measured by the wholesale price index (WPI), after declining for three consecutive weeks have surged to 9.13% for the week ended September 17 from 8.84% in last week. The increase was due to surge in price of Egg, Meat & Fish, Potato and Pulses. 

According to the data released by Ministry of Commerce and Industry, the index for Food Articles group rose by 0.8% to 197.3 (Provisional) from 195.7  (Provisional) for the previous week due to higher prices of gram (6%), masur, arhar, urad, poultry chicken, condiments & spices and fish-marine (2% each) and fruits & vegetables, maize, jowar and milk (1% each).  However, the prices of barley (4%), coffee (3%) and bajra and ragi (2% each) declined.

The index for Non-Food Articles group declined by 0.3% to 184.8 (Provisional) from 185.4  (Provisional) for the previous week due to lower prices of flowers (15%), soyabean (7%), groundnut seed and raw jute (3% each) and gingelly seed (1%).  However, the prices of raw silk (7%), raw cotton (4%), raw rubber (2%) and fodder, mesta, copra (coconut) and linseed (1% each) moved up.

The index for 'Minerals' group declined by 0.9% to 303.6 (Provisional) from 306.3 (Provisional) for the previous week due to lower prices of copper ore (15%), chromite (10%), bauxite (7%) and barytes (4%).  However, the prices of magnesite (14%), zinc concentrate (11%), sillimanite (7%), steatite (6%), dolomite (3%) and iron ore (2%) moved up.

As a result, the index for primary articles group which has the highest weightage of 20.12% in WPI rose by 0.4 % to 202.7 (Provisional) from 201.9 (Provisional) for the previous week. The annual rate of inflation, calculated on point to point basis, stood at 11.43% (Provisional) for the week ended September 17 as compared to 12.17 % (Provisional) for the previous week.

Meanwhile, the index for Fuel and Power group which has a weightage of 14.91% in WPI, rose by 0.7% to 169.4 (Provisional) from 168.2 (Provisional) for the previous week due to higher prices of petrol (5%),  light diesel oil and furnace oil (4% each), naphtha and aviation turbine fuel (3% each) and bitumen (1%).  However, the prices of electricity (industry) (5%) declined. The annual rate of inflation, calculated on point to point basis, stood at 14.69 % (Provisional) for the week ended September 17 as compared to 13.96 % (Provisional) for the previous week.

The surge in weekly food inflation is likely to raise the concern of the government and industry as the Reserve Bank of India has reiterated that the RBI is ready to sacrifice some economic growth in order to control inflation and inflation expectations. In order to control inflation, the RBI since March 2010, has increased its short term lending rates by 350 basis points or 3.5%, as a result, cost of capital has increased significantly, affecting the pace of investment and growth of the economy.

The S&P CNX Nifty is currently trading at 4,979.15, higher by 33.25 points or 0.67% after trading as high as 4,991.05 and as low as 4,906.00. There were 28 stocks advancing against 21 declines while 1 stock remained unchanged on the index.

The top gainers on the Nifty were JP Associates up 5.79%, Grasim up 3.76%, HDFC Bank up 2.84%, M&M up 2.65% and Infosys up 2.52%.

SesaGoa down 3.19%, L&T down 3.01%, Reliance Capital down 2.83%, Sterlite down 2.08% and SBI down 1.64% were the major losers on the index.

Asian markets traded on a mixed note, Jakarta Composite climbed 0.96%, KLSE Composite added 0.98%, Nikkei 225 surged 0.99%, Seoul Composite rallied 2.68%, Straits Times gained 0.07% and Taiwan Weighted garnered  0.50%. On the contrary, Shanghai Composite plunged 1.12%.

The European markets were trading in mix with, France’s CAC 40 gained 1.05%, Germany's DAX garnered 0.41% and Britain’s FTSE 100 declined 0.33%.