Lack of major triggers causes flat close on the Dalal Street

Lack of major triggers throughout the session caused flat close on the Dalal Street on Thursday with slight down-tick. Though rise in food inflation had triggered some action on the street in morning trades but the selling pressure got arrested as the day progressed. Both the key indices settled below the crucial levels of 20,000 (Sensex) and 6,000 (Nifty) during the session. Consumer durables, metal and realty counters were the major laggards on the bourses while healthcare, software and technology stocks showed some resilience in trade. The mid-cap and small-cap indices also mirrored their large-cap peers during the session.

Among other regional indices, most of the bourses ended lower today but with modest cuts while the European markets were absolutely flat in trade. The US index futures were indicating sluggish start of the session on the Wall Street later in the day. The Dow future was up by 2 points.

Back home, the opening of the session was positive as investors took cues from higher close on the Wall Street in overnight trade. Meanwhile, the positive momentum witnessed in early trades didn't last too long as mixed cues from regional peers triggered some worries among investors. The local markets pared their early gains to edge lower in the mid-morning session as investors opted to profit booking ahead of release of weekly inflation data from the government. The selling pressure got intensified in late-morning trades after the government data showed rise in food price inflation to 12.13% during the week ended December 11, 2010 as compared to 9.46% in the earlier week. The main indices touched their intraday lows in the afternoon session. Meanwhile, the selling pressure got arrested in late-afternoon trades and the markets once again inched closer to the neutral line. The bourses moved along the neutral line in late trades during which various efforts to edge higher got capped. At the end, the markets finished the session with meager losses. The BSE Sensex and the NSE Nifty moved within a narrow range of around 135 points and 40 points, respectively during the entire session. Volume for the day was the lowest compared to past couple of sessions at around Rs 98,800 crore. The market breadth on the BSE was in favour of declines; the losers narrowly outnumbered the gainers in a ratio of 1479:1331 while 178 shares were unchanged.

Meanwhile, weekly price inflation's move into the double digits once again has raised concerns among investors that the Reserve Bank of India (RBI) may resume its policy tightening activity in its next month's review.

NTPC, Sterlite Industries and Infosys were the major gainers in trade today. Index heavyweight, RIL, witnessed flat-to-positive close during the session.

On the flip side, Hindalco Industries, Tata Steel and DLF were the major losers on the main index.

A2Z Maintenance & Engineering Services, which debuted on the bourses today, got punished in trade. The stock closed at Rs 328.9, down 17.78% or 71.1 rupees from its listing price of Rs 400.

On the charts: The S&P CNX Nifty consecutively closed below 6,010-level in last two sessions. If the index breaks 5,938-mark next major support will be around 5,842 level. On the flip side, resistance will be around 6,030 and 6,080. 

Finally, the BSE Sensex declined 32.92 points or 0.16% to settle at 19,982.88 while the S&P CNX Nifty dropped 4.40 points or 0.07% to end at 5980.

The BSE Sensex touched a high and a low of 20,076.08 and 19,939.30 respectively.

NTPC up 1.50%, Sterlite Inds up 0.95%, Infosys up 0.77%, HDFC Bank up 0.41% and HDFC up 0.40% were the major gainers on the Sensex.

On the other hand, Hindalco Inds down 1.81%, Tata Steel down 1.61%, DLF down 1.26%, Tata Motors down 1.23% and L&T down 1.09% were the major laggards on the index.

The BSE Mid-cap and Small-cap indices declined 0.23% and 0.13%, respectively.

Meanwhile, after declining for several weeks due to improved supply of food commodities and activation for high base effect from the previous year, food inflation in India has been inching up again, clouding the outlook of price movement. This contradicts the expectations of the government and the central bank that inflation will finally follow a sharp declining trajectory as has been the historical trend over the Nov-Feb period.

According to the data released by the ministry of commerce and industry, India's food price index rose 12.13% on annual basis during week-ended Dec 11, substantially faster compared with 9.46% in the previous week. On a sequential basis, the index rose by sharply by 2.3% to 185.8 from 181.7 for the previous week due to higher prices of vegetables and spices. This was foruth consecutive week of rise in index, suggesting prices were continuing to rise despite expected increase in supply of farm commodities. Also, the quantum of rise on a weekly basis is way too high to be called a random increase in declining trend.

The index for 'Non-Food Articles' group on the other hand rose by 1.2% to 171.6 compared with 169.5 for the previous week. The broader 'Primary Articles' index, which has a weight of 20.12% in the overall wholesale price index (WPI), also increased by 1.8% to 187.9 compared with 184.6 for the previous week. The annual rate of inflation, calculated on point to point basis, for this group also rose significantly to 15.35% from 13.79% for previous week.

The index for 'Fuel & Power' with a weight of 14.91% in overall WPI on the other hand increased by 0.1% to touch 149.5 compared with 149.1 in the previous week, mainly due to higher prices of light diesel oil, naphtha and aviation turbine fuel. The annual rate of inflation for this group too increased to 10.74% compared with 10.67% in the previous week. With government controlled fuel retailers having raised the petrol prices, and possibility of government approving some hike in diesel prices as well, fuel inflation is likely to go up further in near term.

The latest hike in food inflation is quite sharp and has challenged the expectations was food prices will soften with a bumper Kharif crop. It will increase the pressure on the Reserve Bank of India (RBI), which had left benchmark policy rates unchanged in the last review, to tighten the stance of monetary policy further in the January review. The central bank had itself said on Wednesday that the upside risk on inflation remained strong. If no consistent declining trend in food inflation is visible, the RBI will have no choice but to further hike rates in January. 

The main losers in the BSE sectoral space were Consumer Durables (CD) down 1.11%, Metal down 0.97%, Realty down 0.89%, Capital Goods (CG) down 0.88% and Auto down 0.83%.

On the flip side, Healthcare (HC) up 0.69%, Information Technology (IT) up 0.27%, TECk up 0.18% and Bankex up 0.06% were the only gainers in the BSE sectoral space.

India's Planning Commission, the top economic strategy making body of the country, said on Wednesday that the environment ministry should show some flexibility in terms of demarking the go and no-go areas so that while the environmental concerns are addressed, industrial growth and overall development in the country is not effected either.

"If we get a sensible definition of what is no-go... something that is called no-go for now does not have to be no-go for ever. But the main point is that they should be flexible," said the deputy chairman of the Commission M S Ahluwalia while talking to reporters on the sidelines of the Public-Private Partnership (PPP) Conclave in New Delhi on Wednesday.

"The criteria that we use to establish what is no-go should be very carefully defined and based on some scientific considerations," Ahluwalia said. He added that the Planning Commission has taken up the issue with environment ministry and the latter was willing to mend some rules. "He (Environment Minister Jairam Ramesh) is quite willing to be flexible on what the criteria should be", Ahluwalia said.

The stand taken by the Planning Commission will support the demand of coal ministry which had recently sought Cabinet approval for its proposal for allowing mining in 90% of coal blocks categorised as ' no- mining' areas currently by the environment ministry. No-go areas comprise of a total of 206 coal blocks spread across 4,039 sq km in nine coalfields, with a production potential of 660 million tonne, according to the coal ministry.

The ministry of environment and forests wants greater regulations in mining in light of large-scale illegal mining across India, which causes environmental hazards. The coal as well as mines ministries however want regulations to be practical and flexible so that more coal and other minerals can be mined to meet the requirements of economic development. For instance, a number of power projects in India get delayed simply because it is difficult to get environment clearance for coal linkages.

The S&P CNX Nifty touched a high and a low of 6,006.45 and 5,964.60, respectively.

Sun Pharma up 6.18%, Sesa Goa up 1.66%, NTPC up 1.66%, HCL Technology up 1.43% and Infosys up 1.13% were the major gainers on the Nifty.

On the other hand, SAIL down 4.71%, Hindalco down 1.85%, Tata Steel down 1.62%, Kotak Bank down 1.56% and Ambuja Cement down 1.50% were the major losers on the index.

All the Asian equity indices barring Taiwan Weighted finished in the negative terrain on Thursday. Shanghai Composite lost more than half a percent in the day's trade as developers in China fell after the government stepped up for inspection of real estate investments to curb rising housing property prices, countering gains among exporters and commodity producers while, Japanese Nikkei remained closed today on account of a public holiday.

Shanghai Composite declined 22.68 points or 0.79% to 2,855.22, Hang Seng dropped 142.22 points or 0.62% to 22,902.97, Jakarta Composite dipped 9.15 points or 0.25% to 3,611.53, KLSE Composite shed 0.57 points or 0.04% to 1,514.48, Straits Times slipped 6.53 points or 0.21% to 3,137.78 and Seoul Composite was down by 0.58 points or 0.03% to 2,037.53.

On the flip side, Taiwan Weighted was up by 38.38 points or 0.43% to 8,898.87.

European markets were trading mixed on Thursday. France's CAC 40 declined 0.25%, while Germany's DAX jumped 0.08% and Britain's FTSE 100 added 0.10%.

 

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