Benchmarks climb to day’s high; rate cut hope bolsters sentiment

Benchmark equity indices, adding further ground, are trading near day’s high level, on account of renewed buying activity on the back of 40 month low inflation data, which strengthened the case for rate cut in RBI’s May 3 Policy Review. In a big relief, the annual rate of inflation, based on monthly WPI, eased to 5.96% (Provisional) for the month of March, 2013 (over March, 2012) as compared to 6.84% (Provisional) for the previous month and 7.69% in the corresponding period of the previous year. Sectorally, Oil & Gas, PSU and Banking counters were leading the gainers list, while Information Technology, Consumer Durable and Metal counter were the laggards. However, mostly negative global set up is capping the further upside of the bourses. Benchmark 30 share index, Sensex and 50 share widely followed index, Nifty is trading above the psychological 18300 and 5550 levels respectively, with gains of close to half a percent. Meanwhile broader indices too have notched up over half a percent.

On the global front, Markets across China slumped on Monday after country’s growth unexpectedly slowed in the first quarter, adding to concerns that Asia's biggest economy may be losing steam after an earlier recovery in the year. Meanwhile, European shares got to a mixed start as investors awaited a report on manufacturing in New York.

Closer home, in sector specific activity, Bank counter was trading with strong gains on account of renewed rate cut hopes; while Information Technology counter was sulking in red for second consecutive session. Additionally, shares of companies associated with gold, Muthoot Finance and Manappuram Finance tumbled in early trade Monday, as prices of the yellow metal came under pressure.  On the other hand, Indian oil marketing companies such as BPCL, HPCL are gaining on hopes a slump in crude prices would lower the under-recoveries. The overall market breadth on BSE is in the favour of advances which have thumped declines in the ratio of 1080:907, while 119 shares remained unchanged.

The BSE Sensex is currently trading at 18328.00, up by 85.44 points or 0.47% after trading in a range of 18339.51 and 18144.22. There were 15 stocks advancing against 15 declines on the index.

The broader indices were trading in green; the BSE Mid cap and Small cap indices were trading higher by 0.56% and 0.60% respectively.

The top gaining sectoral indices on the BSE were, Oil & Gas up by 2.73%, PSU up by 1.97%, Bankex up by 1.05%, Capital Goods up by 0.93% and Realty up by 0.92% and while, IT down by 2.23%, Consumer Durables down by 1.68%, TECk down by 1.29%, Metal down by 0.64% and Metal down by 0.59% were the top losers on the BSE.

The top gainers on the Sensex were ONGC up by 5.49%, Bharti Airtel up by 3.40%, SBI up by 3.02%, HDFC up by 2.39% and Reliance Industries up by 2.15%.

On the flip side, TCS down by 2.78%, Tata Motors was down by 2.09%, Infosys was down by 2.06%, Sterlite Inds was down by 1.81% and HUL down by 1.27% were the top losers on the Sensex.

Meanwhile, in a big relief, the annual rate of inflation, based on monthly WPI, eased to a 40-month low at 5.96% (Provisional) for the month of March, 2013 (over March, 2012) as compared to 6.84% (Provisional) for the previous month and 7.69% during the corresponding month of the previous year. Build up inflation in the financial year so far, too has increased and stood at 5.96% compared to a buildup of 7.69% in the corresponding period of the previous year. However, the January inflation figures have been revised upward to 7.31% from 6.62%.

However, manufactured products, which carry weight of 64.97% in the index, rose by 0.1% to 148.4 (Provisional) from 148.2 (Provisional) for the previous month. The index for 'Food Products' group declined by 0.5% to 164.9 (Provisional) from 165.7 (Provisional) for the previous month. The index of Fuel & Power, which has weight of 14.91%, rose by 3.0% to 195.2 (Provisional) from 189.5 (Provisional) for the previous month due to higher prices of zinc concentrate, iron ore, crude petroleum and copper ore.

The index of Primary Articles, having weight of 20.12% too rose by 0.4% to 223.6 (Provisional) from 222.7 (Provisional) for the previous month. The index for 'Non-Food Articles' group rose by 0.6% to 206.9 (Provisional) from 205.60 (Provisional) for the previous month, while the index for 'Minerals' group rose by 2.1% to 357.4 (Provisional) from 350.1 (Provisional) for the previous month.

There was a wide expectation that the inflation might have edged higher in March, given the index snapped the four month’s decelerating trend in the previous month. But the surprise slowdown in numbers has further strengthened the case for rate cut in RBI’s May 3 Policy Review as these figures now fall within the RBI’s comfort level. Reiterating that India's inflation still remains high, RBI governor Duvvuri Subbarao said that the inflation numbers should come down to a 4-6% range, in order to facilitate monetary easing.

Meanwhile, the consistent fall in core inflation, or inflation that excludes volatile food and fuel prices, too provides the central bank with some room to cut policy rates by 25 basis points in its Policy review in May. The Reserve Bank of India (RBI), has so far responded to a slight easing in headline inflation in recent months with two 25 basis point cuts this year to bring the benchmark repo rate to 7.50%.

The CNX Nifty is currently trading at 5,565.60, up by 37.05 points or 0.67% after trading in a range of 5,567.95 and 5,500.30. There were 30 stocks advancing against 20 declines on the index.

The top gainers of the Nifty were BPCL up by 7.77%, ONGC up by 5.73%, Bank of Baroda up by 3.72%, Ultra Cement up by 3.34% and Bharti Airtel up by 3.33%.

On the flip side, TCS down by 3.03%, Infosys down by 2.67%, Tata Motors down by 2.13%, Sesa Goa down by 1.93% and Cairn down by 1.55% were the major losers on the index.

Most of the Asian equity indices were trading in red; Shanghai Composite declined by 1.13%, Hang Seng tumbled by 1.31%, Jakarta Composite dropped 0.70%, Nikkei 225 slumped by 1.55%, Straits Times slipped 0.10%, KOSPI Composite dipped 0.20% and Taiwan Weighted was down by 0.74%.

On the flip side, KLSE Composite was up by 0.20% was the only loser.