Indian equities trim losses; trade continues below neutral line

Indian equities trimmed losses to trade firm below the neutral line in the late afternoon session as investors started accumulating front line beaten down blue chip stocks on reports that India’s food inflation nosedived to a nearly four-year low of 4.35% during the week ended December 3. The chief economic adviser to finance ministry, Kaushik Basu even went ahead to predict that the food inflation would recede to 3% by the first week of January. In the fight between bulls and bears to gain control over the market, bulls are trying hard to take control over the market with bears losing its momentum while marking its rally. Traders were seen piling up positions in FMCG, Power and Oil & Gas sector while selling was witnessed in Consumer Durables, Capital Goods and Auto sector.

Industry heavyweight RIL is trading in green with gain of around one percent. Also, HPCL, BPCL, IOC, Oil India and Petronet LNG from Oil & Gas sector were trading in green pushing the markets higher. HUL and ITC from FMCG sector were seen trading firm in green helping to pull the markets up. Tata Power, Power Grid, NTPC, JSW Energy, GMR Infra, Crompton Greaves and Siemens from Power pack were trading in green helping the markets to edge higher. L&T, BHEL, BEML, BEL, Praj Industries, Punj Lloyd, Suzlon Energy and Thermax from Capital Goods space were trading weak in red drifting the markets lower. Hero MotoCorp, Tata Motors, M&M, Maruti and Ashok Leyland from Auto counters were trading in red driving the markets down.

In the scrip specific development, sugar companies EID Parry (India), Dhampur Sugar Mills, Balrampur Chini Mills, Shree Renuka Sugars, Simbhaoli Sugars, Bajaj Hindusthan, Sakthi Sugars, Triveni Engineering & Industries and Dwarikesh Sugar Industries were trading in red after New York raw sugar futures for March delivery dropped yesterday on ICE. Excel Crop Care edged lower extending yesterday’s fall caused by a clarification from Supreme Court that the permission for exports of endosulfan formulation is only for the remaining stock of 2,698.056 kilolitres. Punj Lloyd is trading weak in red on reports that Private equity giant Warburg Pincus is likely to exit the company. Orchid Chemicals & Pharmaceuticals is in red on reports that the company is set for huge forex losses on FCCB.

On the global front, all Asian markets were seen trading in red while the European markets were trading in green on optimistic note. German Chancellor Merkel reiterated opposition to euro bonds, while European Central Bank council member Jens Weidmann stated that policy makers are becoming more skeptical that the ECB’s debt purchases are working. Merkel further stated there’s no looking back after last week’s European summit deal on stricter budget controls, with the path to fiscal union in the euro region now irreversible. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 4,750 and 15,800 levels, respectively. The market breadth on the BSE was in favor of declines in the ratio of 720:1840 while 123 scrips remained unchanged.

The BSE Sensex is currently trading at 15,848.56 down by 32.58 points or 0.21% after trading as high as 15,891.78 and as low as 15,596.22. There were 15 stocks advancing against 15 declines on the index.

The broader indices were trading on a bleak note; the BSE Mid cap index plummeted 1.08% while Small cap plunged 1.50%.

On the BSE sectoral space, FMCG up 0.86%, Power up 0.42% and Oil & Gas up 0.22% were the only gainers while Consumer Durables down 2.81%, Capital Goods down 1.78%, Auto down 1.25%, TECk down 1.03%, and IT down 0.72% were the major losers in the space.

Tata Power up 3.80%, Coal India up 2.97%, HUL up 2.70%, HDFC up 1.45% and NTPC up 1.38% were the major gainers on the Sensex, while Bharti Airtel down 3.17%, Sterlite down 2.62%, BHEL down 2.14%, Tata Motors down 2.06% and Wipro down 2.06% were the major losers in the index.

Meanwhile, India’s weekly food inflation, measured by the Wholesale Price Index (WPI), fell to a nearly four-year low of 4.35% for the week ended December 3, the fifth successive decline and the lowest rate of food inflation since the week ended February 23, 2008. The decline was mainly on the back of reducing prices of onion, potato, vegetables and egg, meat and fish. The easing of food inflation is in line with the government’s expectations.

According to the data released by the Ministry of Commerce and Industry, the index for ‘Food Articles’ group  declined by 1.0% to 191.9 (Provisional) from 193.8 (Provisional) for the previous week due to lower prices of fruits and vegetables (4%), poultry chicken and urad (3% each) and ragi, gram, barley, tea, condiments and spices and arhar (1% each). However, the prices of pork (6%), beef and buffalo meat and jowar (2% each) and bajra, fish-inland and maize (1% each) moved up.

The index for 'Non-Food Articles' group rose by 0.4% to 178.4 (Provisional) from 177.7 (Provisional) for the previous week due to higher prices of flowers (6%), gaur seed and linseed (5% each), raw rubber (4%), niger seed and raw silk (3% each), rape and mustard seed (2%) and sunflower (1 %). However, the prices of gingelly seed and castor seed (3% each), fodder (2%) and coir fibre, soyabean, copra and groundnut seed (1% each) declined.

As a result the index for ‘Primary Articles’ which accounts for 20.12% of the WPI declined by 0.6% to 198.1 (Provisional) from 199.3 (Provisional) for the previous week. The annual rate of inflation, calculated on point to point basis, stood at 5.48% (Provisional) for the week ended December 3, as compared to 6.92% (Provisional) for the previous week.

Meanwhile, the index for ‘Fuel and Power’ group, which accounts for 14.91% of WPI, rose by 0.3% to 172.4 (Provisional) from 171.8 (Provisional) for the previous week due to higher prices of aviation turbine fuel and bitumen (4% each) and naphtha and light diesel oil (3% each). However, the prices of petrol and furnace oil (1% each) declined. The annual rate of inflation, calculated on point to point basis, stood at 15.24% (Provisional) for the week ended December 3 as compared to 15.53% (Provisional) for the previous week. 

Further, Chief Economic Adviser Kaushik Basu had expressed hope that food inflation may fall below 3% in a month’s time. The fall in food inflation comes as a silver lining for the government at a time when the economy is experiencing a slowdown, with GDP growth dipping to 6.9% in the second quarter, the lowest rate of expansion in over two years. Industrial production has also witnessed a contraction, with output shrinking by 5.1% in October.

Just a day before the Reserve Bank of India’s monetary policy review, weekly food inflation coming less than 5% mark is a big relief to the government and the policy maker, who have been facing criticism from all quarters for persistently high prices. The RBI, in its second quarter review of the monetary policy last month, had said it expects inflation to remain elevated till December on account of the demand-supply mismatch before moderating to 7% by March 2012.

The S&P CNX Nifty is currently trading at 4,753.50, lower by 9.75 points or 0.20% after trading as high as 4,763.10 and as low as 4,673.85. There were 21 stocks advancing against 29 declines on the index.

The top gainers on the Nifty were Tata Power up 4.32%, IDFC up 3.32%, Coal India up 2.80%, Power Grid up 2.75% and BPCL up 2.73%.

Ranbaxy down 3.46%, Cairn down 3.40%, Sesa Goa down 3.21%, Bharti Airtel down 3.13% and Sterlite down 2.78% were the major losers on the index.

Asian markets traded on a pessimistic note, Shanghai Composite plunged 2.14%, Hang Seng plummeted 1.78%, Jakarta Composite shed 1.78%, Nikkei 225 declined 1.66%, Straits Times fell 1.26%, Seoul Composite dropped 2.08% and Taiwan Weighted nosedived 2.28%.

The European markets were trading in green with, France’s CAC 40 ascended 0.84%, Germany’s DAX jumped 1.19% and Britain’s FTSE 100 added 0.99%.