Sensex sinks to day’s lows on inflation data, Euro-zone woes

Stock markets in India showed sign of weakening in Thursday afternoon trades with the benchmark equity indices wilting from the day’s highs to touch the low point of the day. Unsupportive cues from the European markets were pushing the domestic markets to lower levels as the key gauges breached the psychological 5,100 (Nifty) and 16,800 (Sensex) levels. Domestic markets got off to a quiet start as sentiments across global space remained uninspiring. Markets across the Asian region traded on a pessimistic note as investors were influenced by overnight fall in US markets pressured by disappointing US economic reports like May retail sales data which once again declined and wholesale prices numbers which too fell the most in three years. Moreover, lingering uncertainties over Europe's financial turmoil too kept investors away from riskier asset classes as Greek banks saw elevated levels of withdrawals ahead of the country's crucial general elections this weekend and weak domestic economic news. On the domestic front, though a government data showed India’s headline inflation rose in May, however, investors focused more closely on the core inflation number which has come in at 4.99%, slightly below the 5 percent threshold, and is likely to compel Reserve Bank of India to resort to monetary easing policies. Some degree of political uncertainty too has had its toll on sentiments after seeing the latest developments in the political circle on presidential election. Meanwhile, cues from the money market too remain sedate as the beleaguered rupee has resumed its streak of deprecation and is gradually inching towards 56 levels against a dollar, fuelling investor concerns. Besides, stocks from the fertilizer counter, which traded on a sanguine note since morning trades on the buzz that government may raise urea price by 10 percent with an aim to cut up to Rs 2,000 crore on the total subsidy outgo on urea, too have come off the day’s highs while some have even slipped in to the negative terrain. On the BSE sectoral space, Capital Goods counter remained the top laggard with close to two percent cut followed by the rate sensitive Bankex index which sank over one and half a percent. However, investors showed some buying interests in defensive FMCG counter which climbed close to a percent.

Moreover, the broader markets traded on weak note as the Mid cap index slipped close to half a percent and underperformed its larger peers. The bourses fell on weak volumes of over Rs 0.7 lakh crore while the market breadth on BSE was in favor of declines in the ratio of 1359:960 while 142 scrips remained unchanged.

The BSE Sensex is currently trading at 16,819.93 down by 60.58 points or 0.36% after trading as high as 16,921.49 and as low as 16,768.19. There were 11 stocks advancing against 19 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index declined 0.42% and Small cap index fell 0.09%.

On the BSE sectoral space, FMCG up 0.79%, IT up 0.64%, TECk up 0.44% and Metal up 0.06% were the only gainers, while Capital Goods down 1.89%, Bankex down 1.55%, Power down 1.02%, Realty down 0.90% and PSU down 0.80% were the only laggards in the space.

ITC up 1.33%, Infosys up 1.08%, Tata Steel up 0.67%, M&M up 0.57% and TCS up 0.45% were the major gainers on the Sensex, while NTPC down 2.92%, L&T down 2.90%, Tata Motors down 2.48%, ICICI Bank down 2.33% and SBI down 1.48% were the major losers in the index.

Meanwhile, the annual rate of inflation, based on the wholesale prices index (WPI) in India, inched up in the month of May to 7.55% as compared to 7.23% for the previous month, while it was lower than 9.56% during the corresponding month of the previous year. Though the rise in headline inflation was largely on the expected lines, the markets participants now are likely to turn their focus towards the Reserve Bank of India’s (RBI) mid quarter monetary policy review meeting on June 18.

According to the data released by the ministry of commerce and industry, the annual rate of inflation, based on monthly WPI, rose to 7.55% for the month of May, 2012 while build up inflation in the financial year so far was 1.80% compared to a buildup of 1.94% in the corresponding period of the previous year. The index for primary articles group, which has a weightage of 20.12% in overall WPI, rose 0.1 percent to 216.1 from 215.9 for the previous month largely because of 1.7 percent jump in index of non-food articles.

The index for fuel and power group with a weightage of 14.91% in WPI rose by 0.1 percent to 178.9 from 177.1 for the previous month due to higher prices of petrol (3%), bitumen (2%) and lubricants (1%).  However, the prices of light diesel oil (4%) and furnace oil, aviation turbine fuel and naphtha (1% each) declined. The index for Manufactured Products, which has weight of almost 65% in the WPI, rose by 0.5 percent to 144.3 from 143.6 for the previous month.

After the disappointing industrial production data, market participants were eagerly awaiting the monthly WPI inflation data for May, which has come largely in line with consensus estimates. However, the investors focused more closely on the core inflation number, which has come in at 4.99%, slightly below the 5 percent threshold, and is likely to compel RBI to resort to monetary easing policies. Moreover, connoisseurs were also of the belief that the RBI would cut key interest rates irrespective of the headline inflation number, in order to bring Asia’s third largest economy, which hit a 9-year low of 5.3 percent in the quarter that ended in March, out of the doldrums.

The S&P CNX Nifty is currently trading at 5,091.20, lower by 30.25 points or 0.59% after trading as high as 5,130.00 and as low as 5,083.45. There were 15 stocks advancing against 35 declines on the index.

The top gainers on the Nifty were ACC up 1.61%, ITC up 1.27%, Infosys up 1.13%, Sesa Goa up 1.09% and Cairn up 0.95%.

NTPC down 3.08%, L&T down 2.91%, Tata Motors down 2.70%, ICICI Bank down 2.51% and IDFC down 2.27% were the major losers on the index.

In the Asian space, Shanghai Composite plunged 1.04%, Hang Seng declined 0.81%, Jakarta Composite sank 1.25%, KLSE Composite fell 0.01%, Nikkei 225 dropped 0.22%, Straits Times Index eased 0.19% and Taiwan Weighted shed 0.19%.

On the other hand KOSPI Composite Index climbed 0.65%.

The European markets got off to a weak start as France’s CAC 40 slipped 0.20%, Germany’s DAX fell 0.15% and the United Kingdom’s FTSE 100 shed 0.24%.