Markets show smart turn-around; Nifty regains 5,800 level

Indian indices have staged smart recovery amid volatility, and are trading near the day's high with Nifty regaining the 5,800 level. Sensex is also trading near the psychological level of 19,350. As far as global markets are concerned, Asian markets are trading mostly in the red, while the US index futures have flattened at this point of time while the European markets have made a flat-to-negative start. Back home, the monthly food inflation of December, which stood at 8.43%, slightly above the market expectations of 8.3% seems to have been discounted in last few sessions. Hence, the markets may end the Friday session on a positive note with investors getting some respite after a big fall. Currently, stocks from the Information Technology, Healthcare and Technology spaces are leading the pack of gainers. However, stocks from the Auto, Capital Goods and Realty sectors are still facing the brunt of profit booking. The market breadth on the BSE has improved and was in positive with the gainers thrashing the losers in a ratio of 1485:1139 while 120 shares remained unchanged.

The BSE Sensex gained 141.99 points or 0.74% at 19,324.81. The index touched a high and a low of 19,358.11 and 19,002.57, respectively.

The BSE Mid-cap and Small-cap indices added 0.40% and 0.59%, respectively.

The top gainers on the BSE sectoral front were Information Technology (IT) up 1.52%, Healthcare (HC) up 1.30%, TECk up 1.28%, Consumer Durables (CD) up 1.23% and Bankex up 1.10%.

On the flip side, Auto down 0.48%, Capital Goods (CG) down 0.36% and Realty down 0.02% were the only losers in the BSE sectoral indices.

Meanwhile, India's headline inflation rose significantly in the month of December, increasing the trouble of policy makers who have been forecasting a steady decline in the pace of prices rise over the second half of the fiscal. The development will put the Reserve Bank of India (RBI) into a tight corner as it gets ready to issue last quarterly review of monetary policy for current fiscal.

According to the data released by the government on Friday, headline inflation as measured by the wholesale price index (WPI) in the month of December surged to 8.43% compared with 7.48% for the previous month. The 'All Commodities' index (Base 2004-05=100) for the month of December rose by 1.3% to 144.1 from 142.3 for the previous month. Over the current fiscal so far, the index has risen by 6.11%. In other words, prices have increased more than 6% in the fiscal so far compared with RBI's preference of 5% inflation over a full fiscal.

Looking at the sub segments, it becomes clear that major contribution on the upside has come from the food and primary commodities, which have been key reason for high inflation for over a year. Annual inflation in the primary commodities rose to 16.46% in December compared with 13.0% in the previous month. The index for this broader group was up 1.26 over the last month and has risen 8.26% over the current fiscal so far.

Within the primary goods segment, food inflation surged sharply to 13.55% from single digit figure of 9.41% in the previous month. There was a lot of cheer in government circles after food inflation fell to a single digit figure last month, but that has clearly proved to be a short-lived development.  The index for 'Food Articles' group rose by whopping 3.7% percent to 186.9 from 180.2 for the previous month. The build up since March shows even scarier picture at 14.24%. The index for 'Non-Food Articles' was not far behind and surged 2.3% to 171.6 from 167.7 for the previous month.

There was a mild deceleration in inflation in the manufacturing space which stood at 4.46% against 4.56% a month ago. However, the index for manufactured products also increased by 0.4% to 128.9 from 128.4 in the last month, which indicates that even in this group the downside in inflation has come just from base effect even as the prices are increasing on a month-on-month basis.

Finally, the index for fuel and power which has a weight of 14.91% in the overall WPI increased by 1.0% to 150.1 from 148.6 for the previous month due primarily to higher prices of light diesel oil and furnace oil (6% each), aviation turbine fuel, naphtha and bitumen (5% each) and petrol (3%). The annual inflation for this group remained nearly flat at 11.2%. Fuel inflation could have surged further had the government hiked diesel prices in line with rise in global crude prices.

The top gainers on the Sensex were HUL up 2.86%, Jindal Steel up 2.40%, HDFC Bank up 2.28%, Wipro up 2.20% and Cipla up 2.18%.

Tata Motors down 2.20%, L&T down 1.01%, Maruti Suzuki down 0.80%, Bajaj Auto down 0.75% and Tata Steel down 0.67%, were the top losers on the index.

In a significant development for telecom operators, the government after a month-long wait has given the go-ahead to launch 3G video calling services. Operators however will have to give an undertaking that suitable monitoring mechanism, which allows security agencies to snoop into all 3G services, will be put in place by July 31, failing which services will have to be withdrawn.

The department of telecommunications (DoT) had earlier asked telecom operators to defer the launch of the high-end mobile services that are enabled with the 3G spectrum, including video calling and high speed mobile internet, until a suitable system of real time interception was found. While operators did provide interception, the same was not real time but with a lag, which was not acceptable to the security establishments.

Following the issue, the operators had several rounds of discussions with officials of the telecom and home ministries to find a solution. Telcos offered several alternatives, including a promise to put in place a suitable mechanism that would allow real time interception at a later stage. The government has now agreed to the proposal of telcos of providing a real time interception by middle of the year and services can be started in the meantime.

The S&P CNX Nifty rose 58.15 points or 1.01% to 5810.05. The index touched a high and a low of 5811.40 and 5695.35, respectively. 

The top gainers on the Nifty were Ranbaxy Laboratories up 3.78%, Suzlon Energy up 3.42%, Dr Reddy's up 3.03%, HCL Tech up 2.96% and HUL up 2.91%.

The top losers on the index were SAIL down 4.64%, Tata Motors down 2.12%, Ambuja Cement down 1.32%, ACC down 1.04% and Sesa Goa down 0.65%.

Other Asian markets are mostly trading in the red at this point of time. Shanghai Composite dipped 1.31%, Jakarta Composite declined 1.01%, KLSE Composite shed 0.20%, Nikkei 225 trimmed 0.86%, Straits Times dropped 0.72% and Taiwan Weighted slid 0.03%.

On the flip side, Hang Seng added 0.07% and Seoul Composite rose 0.89%.

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