D-Street climbs on upbeat inflation data; Sensex re-conquers 17,700 levels

Indian stock markets staged a smart performance on Tuesday as the frontline indices settled above important psychological levels and extended the gaining streak for the second straight session. Though, the bourses, in the first half, traded cautiously near their pre-close level awaiting July inflation figure. But, the encouraging WPI inflation numbers for July provided the much needed support to the local markets and prevented downside chances for the bourses. The wholesale price index (WPI), India’s main inflation gauge, unexpectedly slipped at 6.87% for the month of July, its lowest since January 2010, as compared to 7.25% (Provisional) for the previous month and 9.36% during the corresponding month of the previous year. The fuel group inflation came in at 5.98% versus 10.27% during the previous month. Food article inflation lowered to 10.06% compared to 10.81% and the primary article inflation was at 10.39% versus 10.46% on a month on month basis.

The investors piled up positions in the rate sensitive counters like Banking and Auto post the announcement of lower than expected inflation numbers on expectations that the pressure on Reserve Bank of India (RBI) will now increase to cut rates to prop up the country’s economy growth momentum. Stocks like ICICI Bank, State Bank of India, Axis Bank, Bank of Baroda, IDBI Bank, Punjab National Bank and Kotak Mahindra Bank all edged higher in the trade. Moreover, sentiments also got support from retail sector on report that 8 states and 2 UTs are in favour of allowing FDI in multi-brand retail. Scrips like Provogue India, Pantaloon Retail and SRS all went home with decent gains.

Global cues too remained supportive as all the Asian markets went home with green mark as several board members of Bank of Japan in the last meeting said that the central bank should not dismiss any policy options in combating risks to the economy. South Korea's Kospi rallied on foreign investors buying in local shares, which increased technology and auto stocks while, European counters too exhibited an optimistic trade in the early session as slightly better than expected performances by the German and French economies in the second quarter eased anxiety about wider euro zone data that are likely to show the bloc sliding back towards recession.

Back home, some support from the result front also came in after Reliance Power reported better than expected Q1 numbers. The company, on consolidated basis, has reported a rise of 22.12% in its net profit at Rs 239.50 crore for the quarter under review while, the total income from operation of the company has increased by 109.81% at Rs 1136.76 crore for Q1FY13. Moreover, Reliance Infrastructure also reported marginal rise of 1.62% in its net profit at Rs 411.97 crore. However, poor Q1 numbers from Hindalco Industries, Housing Development & Infrastructure (HDIL) and National Aluminium Company weighed down the sentiments.

The gains also remain capped as deficiency of rainfall became a cause for worry as it may add pressure on some commodities. Subbarao stuck to a hawkish tone, reiterating concern about sticky inflation and once again prodding the government to do its bit by reigning in its fiscal profligacy. The gains also got limited after India's trade deficit widened to $15.5 billion in July, as exports recorded their sharpest fall since November 2011, reflecting a weakening of demand from key Western markets which has contributed to a slowdown in Asia's third-largest economy.

Meanwhile, the NSE’s 50-share broadly followed index Nifty, rose by over thirty points to settle comfortably over its psychological 5,350 support level moreover, Bombay Stock Exchange’s Sensitive Index -Sensex- surged by about hundred points and gained its psychological 17,700 mark. Moreover, broader markets too performed well in the session and ended the trade with decent gains. The market breadth was remained in the favour of advances, as there were 1,412 shares on the gaining side against 1,385 shares on the losing side while 136 shares remained unchanged.

The BSE Sensex gained 94.75 points or 0.54% to settle at 17,728.20, while the S&P CNX Nifty rose by 32.45 points or 0.61% to close at 5,380.35.

The BSE Sensex touched a high and a low of 17,753.43 and 17,572.34 respectively. However, the BSE Mid cap index was up by 0.30% and Small cap index up by 0.25%.

Tata Motors up by 2.85%, Tata Steel up by 2.63%, Jindal Steel up by 2.47%, ICICI Bank up by 2.05% and ONGC up by 1.82% were top gainers on the Sensex, while Sun Pharma down by 2.10%, HDFC down by 1.78%, Sterlite Industries down by 1.27%, Bajaj Auto down by 0.97% and Hindalco Industries down by 0.91% were top losers on the index.

The major gainers on the BSE sectoral space were, Oil & Gas up by 1.27%, Bankex up by 1.08%, Metal up by 0.83%, PSU up 0.71% and Auto up 0.71%, while Realty down by 0.73%, Health Care down 0.34% and Power down 0.07% were top losers on the BSE sectoral space.  

Meanwhile, offering a little relief to the Reserve Bank of India (RBI), the wholesale price index (WPI), India's main inflation gauge, unexpectedly slipped at 6.87% for the month of July, it’s lowest since January 2010, as compared to 7.25% (Provisional) for the previous month and 9.36% during the corresponding month of the previous year.

The much awaited figure, was also way below than the consensus estimates of 7.40%. Meanwhile, build up inflation in the financial year so far was reported at 2.36% as compared to a build-up of 3.14% in the corresponding period of the previous year. Meanwhile, the annual reading for May remained unchanged at 7.55%.

The index for primary articles group, which has a weightage of 20.12 percent in overall WPI and includes food, non-food and minerals groups rose 1.1% to 218.8 from 216.4 for the previous month. The index for ‘Food Articles’ group rising by 1.4% to 212.2 from 209.2 for the previous month continued to drive the headline numbers.  Meanwhile, the index for ‘Non-Food Articles’ group rose by 2.9% at 199.2 (Provisional) from 193.5 (Provisional) for the previous month. However, the index for ‘Minerals’ group declined by 3.4% to 335.8 (Provisional) from 347.6 (Provisional) for the previous month.

The index for fuel and power group with a weightage of 14.91percent in index too declined by 1.5% to 175.5 from 178, due to lower prices of light diesel oil (10%), furance oil (8%), naphtha (7%), aviation turbine fuel (ATF) and petrol (4% each). Meanwhile, the index for Manufactured Products, which carries weight of almost 65% in the index, rose by 0.6% to 145.7 from 144.8 for the previous month.

Although the numbers have come lower than expectation, but still fail to emerge as game changing number. Inflation staying above 7% mark for almost two-and-half-years by now, has limited RBI’s abilities of easing monetary policy too aggressively despite the steepest slide in economic growth in almost a decade in the January-March quarter.

The connoisseur are of the beliefs that lower than expected numbers would cast no impact on world’s most aggressive central bank’s anti-inflationary stance during its next mid-quarterly policy review on September 17, 2012, as risk for inflation continues to remain on the upside . The RBI, like previous mid-quarterly policy review, this time around also is expected to maintain its status quo stance on key policy rates.

The S&P CNX Nifty touched a high and low of 5,387.05 and 5,328.80 respectively.

The top gainers on the Nifty were Tata Motors up by 3.31%, Ranbaxy up by 3.30%, IDFC up by 2.85%, Tata Steel up by 2.67% and Axis Bank up by 2.66%. On the flip side, Sun Pharma down by 2.33%, HDFC down by 2.08%, Hindalco down by 1.24%, Sterlite Industries down by 1.23%, and BPCL down by 1.15% were the major losers.

The European markets were trading in green, France's CAC 40 up by 0.38%, Germany's DAX was up by 0.84% and United Kingdom’s FTSE 100 was up by 0.53%.

All Asian markets went home with green mark as several board members of Bank of Japan in the last meeting said that the central bank should not dismiss any policy options in combating risks to the economy. South Korea's Kospi rallied on foreign investors buying in local shares, which increased technology and auto stocks. Meanwhile, markets positioned itself ahead of a raft of economic data coming out later in the day from Europe and the U.S. The German economy, reported by 0.3% growth in the second quarter beating market expectations also supported markets.