Benchmarks unruffled with ugly September inflation figures; Nifty oscillates above 6100 mark

Unruffled with ugly September inflation figures, benchmark equity indices are trading up and about with gains of over quarter of a percent, above the crucial 20,500 (Sensex) and 6,100 (Nifty ) levels respectively. Although, in a knee-jerk reaction bourses did slip below their neutral line, recovery quickly followed by as investors initiated some buying at dips. However, a negative European markets start could temper bourses’ gains going further, nevertheless the mood so far remains upbeat despite ugly set of macro-economic data. On the macro-front, adding to the dilemma of policy makers, while August IIP threw up an ugly surprise by growing merly 0.6% in August, September WPI too came as rude shock by rising to eight month high level of 5.46%.

On the global front, regardless of mixed cues from Asian counterparts, European markets have got off a negative start as the United States edged closer to a debt default after Democrats and Republicans failed to reach an agreement over the weekend.

Closer home, stocks from Information Technology, Auto and Oil & Gas counters are the prominent gainers on the BSE, while those from Fast Moving Consumer Goods, Power and realty counters are the top laggards. Meanwhile, Banking stocks too were in demand on account of Reserve Bank of India's (RBI) decision on Thursday,  October 10, 2013, to allow banks to raise funds from global multilateral institutions until November 30, 2013 as long as the money raised is for general banking purposes and not for capital enhancement. These borrowings from multilateral bodies will also be eligible for the recently opened forex swap facility. The overall market breadth on BSE is in the favour of advanves which thumped declines in the ratio of 1205:845; while 845 shares remained unchanged.

The BSE Sensex is currently trading at 20573.02, up by 44.43 points or 0.22% after trading in a range of 20,645.94 and 20497.88. There were only 15 stocks advancing against 15 declines on the index.

The broader indices were trading in green; the BSE Mid cap and Small cap index were trading higher by 0.73% and 0.66% respectively.

The gaining sectoral indices on the BSE were IT up by 1.76%, Teck up by 1.47%, Auto up by 0.37%, Oil & Gas up by 0.31% and PSU up by 0.26%. While, FMCG down by 0.37%, Power down by 0.19%, Realty down by 0.94% and Metal down by 0.01% were the losing indices on BSE.

The top gainers on the Sensex were Wipro up by 3.22%, TCS up by 3.20%, Dr Reddys Lab up by 1.28%, SSLT and Coal India were up by 1.26%. On the flip side, BHEL down by 2.04%, Hindalco Inds down by 2.01%, Tata Steel down by 1.38%, Gail India down by 1.35% and HDFC down by1.02% were the top losers on the Sensex.

Meanwhile, Wholesale Price Index (WPI) inflation numbers, considered as the next big trigger after IIP data, for determining the policy stance of the central bank on October 19 quarterly policy review, came as a rude shock, surging over 6.46% in September. The reading for July too has been revised upward to 5.58% from 5.79% earlier.

The annual rate of inflation, based on monthly WPI, stood at 6.46% (provisional) for the month of September, 2013 (over September , 2012) as compared to 6.10% (provisional) for the previous month and 8.07% during the corresponding month of the previous year. Build up inflation rate in the financial year so far was 5.64% compared to a build up rate of 4.84% in the corresponding period of the previous year. The Wholesale Price Index for ‘All Commodities’ (Base: 2004-05 = 100) for the month of September, 2013 rose by 1.2% to 179.7 (provisional) from 177.5 (provisional) for the previous month.

Manufactured Products, the major group with weight of 64.97%, rose by 0.70% to 151.0 (provisional) from 150.0 (provisional) for the previous month. Within the group, index for Food Products group rose by 1.4% to 170.0 (provisional) from 167.7 (provisional) for the previous month due to higher price of tea leaf (blended) (20%), processed prawn (14%), copra oil, cotton seed oil and tea leaf (unblended) (4% each), palm oil (3%),  groundnut oil, sunflower oil, gingelly oil and tea dust (blended)  (2% each) and rice bran oil, soyabean oil,  mixed spices, ghee, khandsari, maida, wheat flour (atta),  oil cakes,    gram powder (besan), tea dust (unblended) and gola (cattle feed) (1% each).  However, the price of bakery products and sugar (1% each) declined.

Meanwhile, Primary Articles, the major group having a weightage of 20.12% in overall index, witnessed a rise of 1.5% to 251.6 (provisional) from 247.8 (provisional) for the previous month. Within the group the index of ‘Food Article’ rose by 0.8% to 252.3 (provisional) from 250.3 (provisional), while the index for ‘Minerals’ group rose by sharp 6.4% to 352.1 (provisional) from 330.9  (provisional), due to higher price of copper ore (9%), crude petroleum (8%), dolomite (6%), iron ore (5%), steatite (2%) and       limestone and zinc concentrate (1% each).  However, the price of barytes (9%), sillimanite (7%) and chromite and manganese ore (1% each) declined. However, the index for 'Non-Food Articles' group declined by 2% to 213.7 (provisional) from 209.6 (provisional) for the previous month.

Further, Fuel & Power, having weight of 14.91% rose by 2.6% to 207.5 (provisional) from 202.3  (provisional) for the previous month due to higher price of light diesel oil (11%), furnace oil (8%), aviation turbine fuel (7%), naphtha (7%),  petrol (6%), lubricants (3%), kerosene and bitumen (3% each), high speed diesel (2%) and LPG (1%). Notably, core inflation rose to 2.1% versus 1.9% (month on month).

The alarming rise in WPI numbers after a disappointing factory output data is likely to make the central bank's job lot more difficult, as this adds to their dilemma for fighting inflation, even at the cost of comprising with the pace of economy’s growth, which is already running at decade low. Thus, the elevated price levels will add more pressure on the Reserve Bank of India, leading to further rate hikes.

The CNX Nifty is currently trading at 6,105.45, up by 9.25 points or 0.15% after trading in a range of 6,124.10 and 6,082.90. There were 24 stocks advancing against 26 declines on the index.

The top gainers of the Nifty were TCS up by 3.21%, Wipro up by 3.12%, Axis Bank up by 1.86%, Bank of Baroda up by 1.81% and Coal India up by 1.40%. On the flip side, Asian Paints down by 2.83%, BHEL down by 2.21%, Hindalco Inds down by 2.19%, Tata Steel down by 1.59% and Gail India down by 1.40% were the major losers on the index.

The Asian equity indices were trading in mixed; Jakarta Composite up by 0.74%, KLSE Composite up by 0.01% and Shanghai Composite up by 0.19%. While, Taiwan Weighted down by 0.90%, Straits Times down by 0.61% and Seoul Composite down by 0.23%.

European markets have got off to a negative start; with CAC 40 declining by 0.47%, DAX sliding by 0.39% and FTSE 100 losing 0.17%