Benchmarks slip off from their highs; fears of interest rate hike resurface

Indian equity markets after rising in the early trade boosted by the better than expected TCS results and firm global cues, has lost some ground as the fears of interest rate hike resurfaced. On global front, US future indices were showing divergent trend while, regional counterparts after opening on mixed note gained some traction supported by It stocks on the hopes for a recovery in battered chip prices. Back home, the benchmarks indices gave up their very crucial level of 19,000 mark --Sensex and 5700 mark--Nifty respectively. The broader indices tailing their larger peers have lost some of its gains. On the BSE sectoral front, weakness has crept in, as the stocks from Realty and Power and Capital Goods counters are showcasing weak spell. While, the stocks from Information Technology, TECk, Metal and Bankex counters are keeping the momentum up. The overall market breadth on BSE remains in the favour of advances which have outperformed declines in the ratio of 1485:861, while, 87 shares remained unchanged.

The BSE Sensex is currently trading at 18,970.55, up by 88.30 points or 0.47%. There were 19 stocks advancing against 11 declines on the index.

The broader indices were performing in line with benchmarks; the BSE Mid cap and Small cap indices surged 0.29% and 0.54% respectively. 

The top gaining sectoral indices on the BSE were, IT up by 1.63%, TECk up by 1.24% Metal up by 0.99%, Bankex up by 0.86% and Fast Moving Consumer Goods up by 0.80%. While, Realty down by 0.40%, Power down by 0.24% and Capital Goods down by 0.03% were the losers.

The top gainers on the Sensex were TCS up by 2.74%, Wipro up by 2.41%, Tata Motors up by 2.02%, Tata Steel up by 1.97% and Cipla was up by 1.76%.

Reliance Infra down by 3.42%, Tata Power down by 3.05%, HDFC down by 1.53%, DLF down by 1.40% and Jindal Steel down by 1.23% were the top losers on the index were.

Meanwhile, Despite the recent spike in the headline inflation seen in the month of December, the finance ministry expects it to cool down to 6.5% by the end of current fiscal. However, given the sticky behavior of inflation so far, the expectations of the finance ministry can at best be dubbed as optimistic. 

'It will be around 6.5% by March end,' Finance Secretary Ashok Chawla told media persons when asked about the likely trajectory of inflation going forward. The comment by the finance secretary came even as the food prices inflation nearly doubled over the month of December, pushing the headline wholesale price index (WPI) based inflation to 8.43% in December from 7.48% in the previous month.

Following the sharp increase in inflation in December, the Prime Minister's Economic Advisory Council (PMEAC) has already revised upward its fiscal-end inflation forecast to 7% from 6.5% estimated earlier. "March-end inflation, we had originally thought, would be around 6.5%, but given the current trend, it could be anywhere between 6.5% and 7%,' said C Rangarajan, chairman of the PMEAC, early this week.

In wake of the rising inflation in India, which is highest among the major economies in Asia, the Reserve Bank of India (RBI) is widely expected to raise key rates by at least 25 basis points in its Jan. 25 review in an attempt to bring the pace of rising prices down to its projected level of 5.5% by March. Many economists also expect the RBI to hike its inflation projection to somewhere around 6-6.5%.

However, even though monetary tightening will help guard against surge in inflation expectations, it might not help actually bring the food prices down, The government has in this wake announced late last week a slew of measures including easing imports and banking exports of the food goods, asking state-owned companies to sell some commodities and constituting an inter-ministerial panel to recommend further measures for bringing down food prices. 

S&P CNX Nifty is currently trading at 5,684.45, higher by 29.70 points or 0.53%.There were 36 stocks advancing against 14 declines on the index.

The top gainers of the Nifty were SAIL up by 2.60%, TCS up by 2.87%, Axis Bank up by 2.84%, Wipro up by 2.25% and Tata Motors up by 2.21%.

The top losers of the index were Reliance Infra down by 3.24%, Tata Power down by 3.03%, Sesa Goa down by 1.84%, HDFC down by 1.77% and DLF down by 1.48%.

Most of the Asian equity indices were trading in the green; Shanghai Composite was up 4.70 points or 0.17% to 2,711.36, Hang Seng was up by 0.75%, Nikkei 225 was up by 0.31%, Straits Times was up by 0.19%, Seoul Composite was up by 0.51% and Taiwan Weighted was up by 1.14%.

On the flip side, Jakarta Composite was down by 0.15% and KLSE Composite declined 0.24%.

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