Post session - Quick review

Benchmark equity indices after starting the fresh week on a promising note, capitulated in the late hours to the selling pressure, thereby adding to another red close for Indian equity markets, which were down and out over 2% in previous week. Market men lacking the conviction in India’s growth story preferred staying off risky equities as disappointing second quarter numbers of some companies coupled with the fall in European markets sapped into the risk appetite of local investor’s.  Setback came to Indian equity market mainly after India's headline inflation remained higher above the 9 percent mark for the eleventh straight month, almost unchanged for the month of October. Wholesale Price Index (WPI) for the month of October inched marginally to 9.73% as compared to 9.72% in September.

Barometer gauges also pulverized in trade as investor’s squared off their hefty built positions in early trade on the back of sanguine global set up.  Local equities joining the global rally were trading cheerful after Italy’s new leader vowed to pull the debt-laden country back from the brink of a fiscal disaster which has threatened to tear apart the euro zone. Former European Union Commissioner Mario Monti was nominated on Sunday to replace Silvio Berlusconi as prime minister and pledged to get to work on tackling a crippling debt crisis in the euro zone’s third-largest economy.  Markets also drew some positive leads from the Asian markets which ended the trade on a jaunty note on report that Japan’s GDP rose on an annualized 6.0% in the July to September period. On a quarter-on-quarter basis, GDP grew 1.5%. Japan’s economy contracted 2.1% in the April-June period, due to a massive earthquake and tsunami that struck the country on March 11. However, European shares which turned negative ahead of a 3 billion euro worth five-year Italian bonds auction that would test investors' appetite for the country's debt and could set the equity market’s near-term direction, mainly added to the selling pressure. Meanwhile, US stocks managed to close higher amidst thin, choppy session on Friday amidst ongoing worries over the euro zone crisis limited gains. Both the Dow and S&P 500 clocked gains but lackluster action among tech stocks left the Nasdaq to end narrowly above the neutral line.

Back home, slew of disappointing results acted spoil sport for Dalal Street. State run National Aluminium Company (NALCO) slipped over 1.50% after the company’s net profit for second quarter ended September 30, 2011 declined by 37.80% at Rs 139.34 crore as compared to Rs 224.04 crore for September quarter of the previous fiscal. The company blamed Coal India (CIL) for its poorer financial performance for second quarter. The company in a statement said that the poor performance of the company was mainly due to lesser and poor quality coal from Mahanadi Coalfields, a subsidiary of CIL, which in turn forced the company to use imported and more expensive coal, buy power from the state grid and also use more of costlier heavy furnace oil. Meanwhile, LIC Housing Finance tumbled over 4% after company’s net profit for the quarter declined by 57.99% at Rs 98.39 crore as compared to Rs 234.21 crore for the September quarter of the previous fiscal on the back of higher provisions for NPAs as mandated by the sector regulator, the National Housing Bank.  Additionally appalling Q2 performance from Mahindra & Mahindra on the back of on higher raw material costs too added to the investor’s angst. M&M’s net profit after tax for the quarter marginally declined by 2.78% at Rs 737.38 crore as compared to Rs 758.49 crore for September quarter of the year 2010.

Stocks from Realty, Consumer Durable and Metal counters featuring in the list of worst performers sent the 30 share barometer index- Sensex-down close to 100 point to shut shop below 17100 mark. However, stocks from TECk, Information Technology and healthcare counters soothed some flexed nerves. The 50 share widely followed index-Nifty-too declining over 15 points ended sub 5200 mark. The broader indices slipping fast and thick in red ended the trade with cuts of over 1%. Trade of over 1,00,000 crore was done in terms of volume turnover. The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 911:1927 while 106 scrips remained unchanged.

The BSE Sensex lost 93.72 points or 0.55% and settled at 17,099.10. The index touched a high and a low of 17,391.99 and 17,094.43 respectively. 9 stocks advanced against 21 declining ones on the index (Provisional)

The BSE Mid-cap index lost 1.69% while Small-cap index was down 1.91%. (Provisional)

On the BSE Sectoral front, TECk was up 0.70%, IT up 0.65% and Health Care up 0.43% were the only gainers while Realty down 2.62%, Power down 2.27%, Auto down 2.18%, Metal down 2.07% and Consumer Durables down 1.91% were the top losers.

The top gainers on the Sensex were Bharti Airtel up 2.35%, Hero MotoCorp up 1.68%, Sun Pharma up 1.62%, Infosys up 1.25% and HDFC Bank up 1.09%.

On the flip side, M&M down 5.83%, Tata Steel down 3.93%, SBI down 3.13%, Tata Motors down 2.97% and Maruti Suzuki down 2.87% were the top losers on the index. (Provisional)

Meanwhile, India’s headline inflation measured by Wholesale Price Index (WPI) for the month of October saw marginally increase to 9.73% as compared to 9.72% in September; the headline inflation has been outriding above 9.7% mark since last three weeks. The marginal increase in prices of fuel and power (0.7%) and food articles (1.83%) on sequential basis are the main reasons for surge in inflation. However, primary articles and manufactured products saw marginal decline, they fell to 11.40% and 7.66% in October, compared to 11.84% and 7.69% in September.

According to the data released by the ministry of commerce and industry, the WPI for 'All Commodities' for the month October 2011 rose by 0.6% to 156.8 (Provisional) from 155.8 (Provisional) for the previous month. Build up inflation in the financial year so far was 4.88% compared to a buildup of 4.84% in the corresponding period of the previous year.

On the month on month basis the primary articles rose by 1.0 % to 204.3 (Provisional) from 202.2 (Provisional) for the previous month. The index for ‘Food Articles’ group rose by 2.2 % to 200.9 (Provisional) from 196.5 (Provisional) for the previous month due to higher prices of fish-inland (12%), gram (10%), condiments & spices (6%), fruits & vegetables (5 %), egg (3%), urad, masur, rice and arhar (2% each) and ragi, pork, moong, tea and milk (1% each). However, the prices of fish-marine (7%), poultry chicken and bajra (5% each), maize and jowar (4% each), barley and coffee (2% each) and wheat (1%) declined.

The index for ‘Non-Food Articles’ group declined by 3.0 % to 178.9 (Provisional) from 184.4 (Provisional) for the previous month due to lower prices of safflower (19%), castor seed (12%), soyabean (9%), flowers (8%), sunflower, raw jute, raw cotton and coir fibre (6% each), groundnut seed (4%), raw silk and copra (3% each) and rape & mustard seed and niger seed (1% each). However, the prices of gingelly seed (10%), gaur seed and linseed (3%) and fodder (1%) moved up.

The index for ‘Minerals’ group rose by 0.3 % to 307.0 (Provisional) from 306.1 (Provisional) for the previous month due to higher prices of steatite (15%), magnesite (7%), barytes (5%) and crude petroleum (3%).  However, the prices of copper ore (12%), chromite (5%), bauxite and zinc concentrate (3% each), manganese ore (2%) and sillimanite and iron ore (1% each) declined.

The index for the Fuel and Power, which has weight of almost 15% in the WPI, rose by 1.0 % to 170.0 (Provisional) from 168.4 (Provisional) for the previous month due to higher prices of bitumen (5%), furnace oil (4%), naphtha and aviation turbine fuel (3% each), petrol and light diesel oil (2% each) and electricity (agricultural), electricity (domestic), electricity (commercial) and electricity (railway traction) (1% each).  However, the prices of electricity (industry) (1%) declined.

The index for Manufactured Products, which has weight of almost 65% in the WPI, rose by 0.4 % to 139.1 (Provisional) from 138.6 (Provisional) for the previous month. Under this segment of WPI, the index for ‘Food Products’, the index for ‘Paper & Paper Products’, the index for ‘Leather & Leather Products’, the index for ‘Rubber & Plastic Products’, saw increase in prices during October compared to last month. However, the index for ‘Beverages, Tobacco & Tobacco Products’, the index for ‘Textiles’ registered decline in prices in October compared to month of September.

The current rate of inflation is serious matter of concern across all segments of economy. The latest inflation data is making a strong case for Reserve Bank of India (RBI) to maintain its anti-inflationary stance and there is good possibility that RBI may go for 14th hike in its short term lending and borrowing rates. The RBI has increased its key policy rates by 375 basis points in last 18 months to tame inflation, however has failed to do so.

On the other hand, the increased interest rate has affected the Indian Banking System, which saw an almost 33.46% increase in its bad loans during second quarter of 2011-12. The gross non-performing assets of 37 listed Indian Banks increased to 1.06 lakh crore in June to September 2011 compared to Rs 79,078 in June to September 2010. This huge surge in gross NPA of Indian banks is mainly because of the non-stop hike in RBI’s key policy rates.

However on many occasions, RBI has hinted that, it may take pause in interest rate hike cycle only if inflation moderates from December. However, latest data indicates that the inflation is less likely to show any sign of moderation from its current rate. 

India VIX, a gauge for market’s short term expectation of volatility gained 2.22% at 25.29 from its previous close of 24.74 on Thursday. (Provisional)

The S&P CNX Nifty lost 26.95 points or 0.52% to settle at 5,141.90. The index touched high and low of 5,228.90 and 5,140.55 respectively. 16 stocks advanced against 34 declining ones on the index. (Provisional)

The top gainer on the Nifty were, Ranbaxy up 3.34%, Bharti Airtel up 2.38%, Hero MotoCorp up  1.71%, HDFC Bank up 1.59%  and Dr. Reddy’s up 1.58%.

On the other hand, Reliance Infra down 7.55%, Reliance Power down 6.85%, M&M down 6.11%, Tata Steel down 3.80% and Maruti down 3.28% were the top losers. (Provisional)

The European markets are trading in mix, with France's CAC 40 down 0.73%, Germany's DAX down 0.06% and FTSE 100 up 0.15%.

Expanding their previous session’s rally, Asian markets exhibited a joyful day of trade on Monday and major indices in the region snapped the session with a gain of over 1-2 percent as Italy’s new leader promised to pull the debt-ridden country back from the edge of a fiscal catastrophe that has endangered to tear the euro-zone. Italian lawmakers on Saturday approved a package of economic reforms that Berlusconi set as the precondition for his resignation amid global market turmoil.

Moreover, investors also cheered the Japanese Gross Domestic Product (GDP) data which grew for the first time in four quarters, recovering from the devastating earthquake-cum-tsunami in March on the back of strong exports and domestic consumer spending. The country’s GDP grew at an annualized pace of 6% in the three months ending September 30, the fastest pace in one-and-a-half-year. Economists had forecast an increase of 5.9%. On a quarter-on-quarter basis, Japan’s GDP grew by 1.5% in the fiscal third quarter.