Markets remain lethargic in trade

The key equity indices have extended their losses in early afternoon trade on the back of sell off in IT sector after IT bellwether Infosys reported lower-than-expected numbers for Q3. The upbeat mood of regional counterparts, who were trading too could not provide much support to the markets. Back home, on the sectoral front, Information Technology, Bankex, Technology, Consumer Durables and Healthcare stocks were putting pressure on markets, while Realty, Auto, Oil & Gas, Power and Capital Goods were on the buyer's radar. Meanwhile, India's food price index rose 16.91% on annual basis during week-ended Jan 1, marginally lower compared with 18.32% recorded in the previous week. Further, India's central bank is likely to ignore the fall in industrial growth of November and hike its short-term lending rate by 25 bps in the forthcoming monetary policy review due to be released on January 25 as inflation remains the core concern of policy makers at this time as the decline in the food inflation number hardly has any substance as on a sequential or week-on-week basis. In the broader markets, mid-caps and small-caps are outperforming the large-caps. The BSE Mid-cap index has advanced 0.25%, and the Small-cap index is up 0.79%. The market breadth on the BSE was positive; the gainers thrashed the losers in a ratio of 1503:1083 while 125 shares remained unchanged.

The BSE Sensex shed 97.03 points or 0.50% at 19,437.07. The index touched a high and a low of 19,522.38 and 19,352.24, respectively.

The BSE Mid-cap and Small-cap indices added 0.25% and 0.79%, respectively.

The top gainers on the BSE sectoral indices were Realty up 0.73%, Auto up 0.59%, Oil & Gas up 0.55%, Power up 0.38% and Capital Goods (CG) up 0.32%.

On the flip side, Information Technology (IT) down 2.04%, Bankex down 1.58% and TECk down 1.37%, Consumer Durables (CD) down 0.52% and Healthcare (HC) down 0.36% were the only losers in the BSE sectoral indices.

Meanwhile, India's food inflation declined marginally in the latest reported week but continues to remain at highly elevated levels putting pressure on the central bank to further tighten its monetary policy despite the generally held belief that prices of food commodities are least responsive to monetary action due to inelastic nature of demand.

According to the data released by the ministry of commerce and industry on Thursday, India's food price index rose 16.91% on annual basis during week-ended Jan 1, marginally lower compared with 18.32% recorded in the previous week. Further, the decline hardly has any substance as on a sequential or week-on-week basis, the index for food goods continued upward journey rising 0.21% to 192.9 from 192.5 for the previous week. This was sixth consecutive week of rise in the index.

The index for 'Non-Food Articles' group also rose by 0.8% to 173.5 compared with 172.2 for the previous week. The broader 'Primary Articles' index, which has a weight of 20.12% in the overall wholesale price index (WPI), however increased by 0.3% to 194.0 compared with 193.4 for the previous week. The annual rate of inflation, calculated on point to point basis, for this group came down to 17.58% from 20.20% for previous week.

The index for 'Fuel & Power' with a weight of 14.91% in overall WPI increased by 0.13% to touch 150.9 compared with 150.7 in the previous week. The annual rate of inflation for this group remained nearly flat at 11.53% against 11.63% in the previous week. Fuel inflation could have surged further had the government hiked diesel prices, but the move is understood to have been deferred for now.

The top gainers on the Sensex were RCom up 2.39%, Tata Motors up 1.61%, Reliance Infra up 1.51%, ONGC up 1.37% and DLF up 1.25%.

Infosys down 4%, ICICI Bank down 1.82%, SBI down 1.81%, HDFC Bank down 1.57% and Tata Steel down 1.49%, were the top losers on the index.

The government may announce some additional measures to curb rising food prices. Food inflation has reached around 18%, the highest in over a year and showed a sudden reversal in trajectory in the last month. Over the month of December, the pace of rising prices nearly doubled, raising political as well as economic stakes for government.

Earlier, Prime Minister Manmohan Singh met Finance Minister Pranab Mukherjee and host of other leaders on Tuesday to discuss measures to curb inflation. Mukherjee later had a meeting with Agriculture Minister Sharad Pawar and Planning Commission Deputy Chairman Montek Singh Ahluwalia on Wednesday. After the meeting Pawar said that the decisions taken would be communicated to the Prime Minister.

The government seems to be finally taking note of the surging food prices and problems it is causing the common man and is looking to take some out of the box solutions for the same. Importing food commodities, restricting exports further, seamless movement of food commodities over different states and selling through government's public distribution system (PDS) are some of the steps that are on the cards for checking prices.

Prime Minister is also expected to meet the Reserve Bank of India (RBI) Governor D Subbarao to discuss what monetary steps can be taken to curb prices. Although the food inflation is generally seen as a supply side phenomenon and is less responsive to monetary tightening due to low elasticity of food items, the RBI can still impact demand of many commodities through its differential reserve requirements. 

The S&P CNX Nifty slid 32.35 points or 0.55% to 5830.90. The index touched a high and a low of 5857.75 and 5809.50, respectively. 

The top gainers on the Nifty were Ambuja Cement up 3.73%, RCom up 2.45%, Tata Motors up 1.89%, ONGC up 1.47% and ACC up 1.43%.

The top losers on the index were Infosys down 4.17%, PNB down 2.26%, SBI down 2.07%, SAIL down 1.98% and ICICI Bank down 1.87%.

Other Asian markets with an exception of Seoul Composite, which is down by 0.26%, are trading in the green at this point of time. Shanghai Composite gained 0.22%, Hang Seng surged 0.57%, Jakarta Composite rose 0.26%, KLSE Composite increased 0.21%, Nikkei 225 jumped 0.73%, Straits Times soared 0.26% and Taiwan Weighted added 0.12%.

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