Indian benchmarks wilt for fifth session in six ahead of RBI policy meet

Indian equity bourses failed to negotiate a close in the positive territory in Thursday’s session as investors chose to trim down positions from blue-chip stocks ahead of the all-important RBI mid-quarter review of the monetary policy on Friday. Market participants overlooked the sixth consecutive weekly fall in the inflation rate as they stayed put awaiting the RBI’s Monetary policy stance which will decide the further direction for markets. The psychological 15,850 (Sensex) and 4,750 (Nifty) levels proved as stern resistances for the frontline gauges as they failed to breach those levels in the session after bouncing from intraday lows. The key gauges recovered a great deal in second half of trade as sentiments got some support from the positive European markets. Meanwhile, India’s food inflation declined sharply to a nearly four-year low of 4.35% during the week ended December 3, thanks to the slew of seasonal factors like new crop arrival in the market, and statistical base effect. The chief economic adviser to finance ministry, Kaushik Basu even went ahead to predict that the food inflation would recede to sub 3% level within a month. However, sentiments remained fragile as the rupee extended its streak of depreciation and plummeted to yet another record low of 54.30 per dollar, taking losses this week to about 4%, on worries that slowing domestic economic growth will dissuade further capital inflows. Besides, PSU oil marketing companies like HPCL and BPCL went home on a positive note as international crude oil prices plunged over 4 percent on Wednesday and also on speculations of hike in petrol prices. Despite the overall gloom in the market, advance tax payments by leading Indian corporate largely remained flat in the third quarter, indicating that the slowdown is impacting their bottomlines. On the global front, pessimistic sentiments prevailed across the Asian region as manufacturing growth in world’s second and third largest economies slowed, highlighting concerns that the global economy is faltering.

Earlier on Dalal Street, the benchmark got off to a daunting opening tracking the pessimistic sentiments prevailing across Asian markets amid the endless stream of discouraging developments from the European region. The frontline indices failed to recover after the gloomy opening and drifted to lowest point of the day in late morning trades ahead of the weekly inflation data announcement. However, sentiments improved after the surprisingly encouraging inflation figures were released, which helped the key gauges to pare losses and climb to higher levels. The optimism in European markets too gave support to the local bourse which eventually snapped the session on a negative note but with moderate losses. The NSE’s 50-share broadly followed index - Nifty suffered moderate cuts of around one third of a percent to settle below the crucial 4,750 support level while Bombay Stock Exchange’s Sensitive Index - Sensex took near to a fifty point cut and closed below the psychological 15,850 mark. Moreover, the broader markets closed on a pessimistic note with large cuts of over a percent and underperformed their larger peers by a fat margin. On the BSE sectoral space, the Capital Goods  pocket bore the maximum brunt of selling pressure and plunged by around two percent followed by the Consumer Durables index which sank by over one and half a percent. On the flipside, the defensive FMCG pocket remained the top gainer in the space with over half a percent gains followed by the Power and Oil & Gas counters which too settled with similar amount of gains. The markets slipped on larger volumes of over Rs 1.53 lakh crore while the turnover for NSE F&O segment too remained on the higher side as compared to Wednesday at over 1.38 lakh crore. The market breadth remained pessimistic as there were 1829 shares on the gaining side against 885 shares on the losing side while 128 shares remained unchanged.

Finally, the BSE Sensex lost 44.67 points or 0.28% to settle at 15,836.47, while the S&P CNX Nifty declined by 16.90 points or 0.35% to close 4,746.35.

The BSE Sensex touched a high and a low of 15,908.02 and 15,596.22 respectively. The BSE Mid cap and Small cap index were down by 1.11% and 1.52% respectively.

The major gainers on the Sensex were Tata Power up 4.09%, Coal India up 3.83%, Hindustan Unilever up 2.80%, NTPC up 2.02% and JP Associate up 1.48%. While, Sterlite Industries down 3.96%, Bharti Airtel down 3.40%, BHEL down 2.48%, Tata Motors down 2.35% and SBI down 2.25% were the major losers on the index.

The major gainers on the BSE sectoral space were FMCG up 0.61%, Power up 0.56%, Oil & Gas up 0.46%, PSU up 0.05% and Health Care (HC) up 0.05%. While Capital Goods (CG) down 1.91%, Consumer Durables (CD) down 1.62%, Auto down 1.23%, Bankex down 0.98% and TECk down 0.93% were the major losers on the BSE sectoral space.

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 touched a high and low of 4,768.65 and 4,673.85, respectively.

The top gainers on the Nifty were Tata Power up 4.90%, Coal India up 4.18%, IDFC up 3.80%, Power Grid up 3.17% and HUL up 3.03%. On the flip side, Ranbaxy down 4.44%, Sterlite Industries down 3.91%, Sesa Goa down 3.59%, Bharti Airtel down 2.91% and SBI down 2.60% were the top losers on the index.

The European markets were trading in green. France's CAC 40 up 0.85%, Britain's FTSE 100 up by 0.61%, and Germany's DAX was up by 1.09%.

Asian stock markets prolonged their downfall for yet another day on Thursday as Japanese business confidence dropped and higher borrowing costs for Italy sparked worries over the ability of European governments to get a grip on their ever-burgeoning debts. Meanwhile, Japanese Nikkei declined over one and a half percent after the Bank of Japan’s “tankan” survey of business sentiment fell to minus 4. The figure represents the percentage of companies saying business conditions are good minus those saying conditions are unfavourable, with 100 representing the best mood and minus 100 the worst. Japan's strong yen has hit multiple historic highs this year against the dollar, making business conditions difficult for Japan’s export-reliant economy.

Moreover, Shanghai Composite tumbled over two percent after a preliminary reading of HSBC’s China Purchasing Managers Index showed the level of activity at mainland Chinese factories contracted again in December, though the rate of decline was slower than in November. Seoul shares too fell over two percent, with buying appetite weak on rising risk aversion amid fears that Europe's debt crisis continues to worsen.