Markets continue to languish as multi month low Feb WPI data fails to bolster sentiment

Multi-month low February headline inflation data failed to cast any impact on local equity markets, which continued to languish in negative terrain, with loss of over half a percent. No respite came in after annual rate of inflation, based on monthly WPI, which cooled off  to nine month low at 4.68% for the month of February, 2014 as compared to 5.05% in January, bolstering hopes that RBI would leave key policy rates on hold, if not slash them in its monetary policy on April 1. However, chances are likely that investors like in previous past, read more into the core inflation data, which hardened to 3.2% in Feb against 3% in January.

Prevailing risk off sentiment on ongoing tensions in Ukraine and weak China data renewed concerns about global growth that weighed on all the emerging markets, including ours. On global front, Asian pacific shares were sulking in red after Russia launched new military exercises near its border with Ukraine on Thursday, even as the US cautioned that Moscow risked facing serious steps if annexation was the outcome of a referendum planned for Sunday in the Crimea.

Closer home, the losses on bourses were led by stocks from Banking, Capital Goods and Realty counters, while Healthcare pivotal was the only gainer on BSE. Capital Goods index losses were led by shares from L&T, which edged lower after L&T fixed the floor price for the offer for sale of shares of L&T Finance Holdings at a discount of 11.61% to stock's closing price on previous trading session. The overall market breadth on BSE was in the favour of declines which thumped advances in the ratio of 1611:805; while 122 shares remained unchanged.

The BSE Sensex is currently trading at 21637.59 down by 137.02 points or 0.63% after trading in a range of 21714.44 and 21608.37. There were 11 stocks advancing against 19 declines on the index.

The broader indices were too trading in red; the BSE Mid cap index was down by 0.48% and Small cap index was down by 0.67%.

The only gaining sectoral indices on BSE was, HealthCare up by 0.74%, while Bankex down by 1.66%, Capital Goods down by 1.09%, Realty down by 0.99%, FMCG down by 0.52% and TECK down by 0.51% were the top losers on the sectoral index.

The top gainers on the Sensex were Dr. Reddy’s Lab up by 1.70%, Gail India up by 0.87%, Sun Pharma up by 0.77%, Cipla up by 0.75% and Hero MotoCorp up by 0.74%. On the flip side, Bharti Airtel was down by 2.28%, Axis Bank was down by 2.23%, Wipro was down by 2.15%, ICICI Bank was down by 2.15% and SSLT was down by 1.59% were the top losers on the Sensex.

Meanwhile, bolstering further case for RBI putting key policy rates on hold in upcoming monetary policy on April 1 after easing Retail inflation data, the annual rate of inflation, based on monthly WPI, cooled to multi month low at 4.68% (provisional) for the month of February, 2014 (over February, 2013) as compared to 5.05% (provisional) for the previous month and 7.28% during the corresponding month of the previous year. The figures encouragingly were lower than street expectation of sub 5% number at 4.9% for February. However, December inflation figures were revised upwards to 6.40% against 6.16% earlier.

The decline in headline inflation figure was on account of easing prices in food articles, which declined by 0.3% to 232.9 (provisional) from 233.6 (provisional) for the previous month that dragged Primary article index, which occupies 20.12% weight in the overall headline index, lower by 0.1% to 238.6 (provisional) from 238.9 (provisional) for the previous month. Meanwhile, the index for ‘Non-Food Articles’  group rose by  0.6 percent to 217.4 (provisional) from 216.0 (provisional) for the previous month.

Further, Fuel & Power, having weight of 14.91%, too declined by 0.1% to 212.6 (provisional) in month under review from 212.8 (provisional) for the previous month due to lower price of coking coal (7%), aviation turbine fuel, kerosene and electricity (agricultural) (2% each) and LPG (1%). However, petrol and high speed diesel (1% each) moved up. However, the index of Manufactured Products, which occupies 64.97% of weight in the overall index, rose by 0.1% 152.7 (provisional) from 152.6 (provisional) for the previous month.

However, in a sign of worry, Core WPI, has been hardening. The figure, which stood at 2.8% in December, edged higher to 3% in January, before finally coming at 3.2% in February. Nevertheless, the latest figure would do some help to reduce some flak towards Congress party-led ruling alliance, which faces an uphill battle in a general election due by May. Earlier in the month, Retail Inflation cooled off to 25 month low of 8.10% in Feb, while IIP posted its first growth in previous four months during January.

The CNX Nifty is currently trading at 6,454.60 down by 38.50 points or 0.59% after trading in a range of 6,472.95 and 6,436.70. There were 20 stocks advancing against 30 declines on the index.The top gainers of the Nifty were Dr. Reddy’s Laboratories up by 2.16%, NMDC up by 1.43%, Jindal Steel up by 1.39%, Asian Paints up by 1.10% and Hero MotoCorp up by 0.89%. On the flip side, HCL Tech down by 2.90%, Kotak Bank down by 2.69%, Axis Bank down by 2.31%, Bharti Airtel down by 2.29% and ICICI Bank down by 2.21% were the top losers on the index.

The Asian equity indices were trading in red; Nikkei 225 was down by 3.30%, Hang Seng dropped 1.16%, Straits Times descended by 0.47%, KLSE Composite slipped 0.57%, Shanghai Composite inched lower by 1.07%, Jakarta Composite lost 0.75%, Seoul Composite slipped 0.75% and Taiwan Weighted was down by 0.69%.