local equity markets trade firm; IT leads

The local equity markets are trading firm in late afternoon session tracking strong global cues, as the European markets and US futures were trading in positive terrain while other regional peers settled mixed. Back home, the BSE Sensex and the NSE S&P CNX Nifty are still hovering around the 19,000 and 5700 levels, respectively. In the sectoral space, IT, TECk , FMCG , Health Care (HC) and Bankex counters have garnered maximum investors attention. On the other hand, Reality, power, Oil and Gas, Capital Goods (CG) and Auto counters remain subdued in trade today .The broader markets are also trading positive. The market breadth on the BSE remained slightly positive; the gainers outpaced the losers in a ratio of 1388:1367 while 124 scrips were unchanged. Total trading volume stood at around Rs 1,17,000 crore at this point of time.
European stocks were trading in green, led by mining shares after Rio Tinto's output figures pleased investors and as metal prices climbed. Meanwhile World stocks hit a fresh 28-month high on Tuesday, while the euro climbed on hopes for an easing of the euro zone debt crisis. Euro zone leaders were attempting to thrash out an agreement on beefing up a rescue plan for indebted countries although no sign of agreement at Monday's meeting. Russia said it may be interested in buying bonds from the rescue fund, the European Financial Stability Facility (EFSF).

The BSE Sensex gained 117.81 points or 0.21% at 19,000.06. The index touched a high and a low of 19,106.95 and 18,933.47 respectively.

The BSE Mid-cap and small cap both were up by 0.06% each.

The main gainers in the BSE sectoral space were IT up 2.09%, TECk up 1.43%, FMCG up1.05%, Health Care (HC) up 1% and Bankex up 0.89%.

On the other hand, Reality down 1.06%, Power down 0.22%, Oil and Gas down 0.18%, Capital Goods (CG) down 0.08% and Auto down by 0.04% were the main losers in the BSE sectoral space.

The top gainers on the Sensex were TCS up 4.47%, Wipro up 2.90%, Cipla up 2.53%, Sterlite Industries up 2.06% and ITC up 1.75%.

On the other hand Reliace Infra down by 3.56%, Tata Power down 2.23%, DLF down 2.15%, Jindal Steel down 1.82% and Bharti Airtel down 0.99% were top losers on the sensex .

The Reserve Bank of India (RBI) is desperate to control inflation, said the Governor, Dr D Subbarao, on Monday, hinting at the all probable rate hike to be implemented on next policy review due on Jan 25. Inflation has reversed its trajectory again in December and after falling for a few months rose sharply by over a percentage point, mainly due to high food commodity prices.

"A lot of other countries are still flirting with deflation... still concerned that they might have deflation. On the other hand, we have surging inflation," Subbarao said in a lecture at the Indira Gandhi Institute of Development Research. "When I meet other central bank governors they tell me: Why don't you give us a bit of your inflation? That's how desperately they want some inflation and how desperate we are to control our own inflation," Subbarao said adding that "We have recovered from the crisis sooner than other countries, but inflation also caught up sooner."

The RBI Governor though added that the central bank would have to calibrate its policy to manage the price rise without hitting the growth in Indian economy which has recovered in the first half of the fiscal to close to the pre-crisis growth trajectory at 8.9%. Nonetheless, most analysts expect that at the moment the RBI will be more concerned about checking inflation because there are indications that inflation expectations are hardening and there is an apprehension of high food inflation generalizing into the broader economy. 

Probably the one reason for surge in inflation in India even as the developed world is guarding against deflation is that growth has recovered much faster in the Indian economy. Aggregate demand in the country has continued to grow at a rapid pace as rising disposable income gives more space to one of the youngest population in world to seek higher standards of living.

Capacities on the other hand have failed to follow the same pace. Investment cycle in the country which nosedived following the global financial crisis and resulting bleak outlook is yet to recover completely. Rising interest rate is doing no good to investment growth either. Also, food supply is difficult to be increased in shirt period. All these factors have been heating up the economy, pushing inflation high and forcing the RBI to rapidly tighten its monetary policy even if some of the short term growth has to be sacrificed.  

The S&P CNX Nifty surged 40.30 points or 0.71% to 5695.05. The index touched a high and a low of 5723.40 and 5,671.25, respectively.   

The top gainers on the Nifty were TCS up 4.63%, Axis Bank up 3.22%, Ambuja Cements up 3.06%, Sunpharma up 3.03% and Wipro was up by 2.83%.

The top losers on the index were Reliance Infrastructure down by 3.46%, Sesa Goa down 2.29% , DLF down 2.26%, Tata Power down 1.95% and Jindal Steel down 1.49%

Other regional peers settled mixed. Shanghai Composite surged 0.09%, Jakarta Composite increased 0.37%, Nikkei 225 surged 0.15%, Straits Times rose 0.34% and Taiwan Weighted zoomed 1.12% while KLSE Composite dipped 0.28%, Seoul Composite trimmed 0.16% and Hangs Seng declined 0.01%

The European markets were trading in green. CAC-40 increased 0.75%, FTSE 100 surged 1.13% and DAX climbed 0.85%.

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