Markets trade near the lows of the day

The domestic equity markets have further dipped into the red, trading near their lows of the day in the early noon session, the surge in inflation figures was weighing down on the markets sentiment which has increased very rapidly to 18.32% during week-ended Dec 25, substantially faster compared with 14.14% in the week-ended Dec 11. The global cues too were unsupportive as the Asian markets were trading mixed while the US futures too were showing downtick, indicating a weak start of markets there. Meanwhile on the domestic front the defensive sector FMCG was dragging the markets lower along with the realty, auto and capital goods the rise of food inflation has raised sense of apprehension among the rate sensitive's that another rate hike is imminent in RBI's upcoming policy review.

The BSE Sensex lost 125.86 points or 0.62% at 20,175.24. The index touched a high and a low of 20,425.85 and 20,170.25, respectively.

The market breadth continues to remain feeble with just 36.06% advances against 60.515 declines. The BSE Mid-cap and Small-cap indices slipped 0.90% and 0.53%, respectively.

The main losers in the BSE sectoral space were FMCG down 1.74%, Realty down 1.74%, Auto down 1.36%, Capital Goods (CG) down 1.07% and Consumer Durables (CD) was down by 0.65%.

On the other hand, TECK and IT both up by 0.17% were the only gainers on the sectoral front.

Food inflation in the country is again on the rise after having declined to single digits by end of November and has increased very rapidly over the last several weeks. Further, the hike is not only due to surge in prices of one or two commodities like onions as the inflation in broader primary goods segment is also increasing equally rapidly. The development will put a lot of pressure on the central bank to tighten monetary policy further.

According to the data released by the ministry of commerce and industry, India's food price index rose 18.32% on annual basis during week-ended Dec 25, substantially faster compared with 14.14% in the week-ended Dec 11. The pace of rising food prices now is once again close to year-ago levels of around 20%. On a sequential or week-on-week basis, the index for food goods rose by whooping by 2.50 % to 192.5 from 187.8 for the previous week due to higher prices of fruits and vegetables (7%) and milk and egg (2%). This was sixth consecutive week of rise in index, suggesting prices were continuing to rise despite expected increase in supply of farm commodities.

The index for 'Non-Food Articles' group on the other hand declined by 0.5% to 172.2 compared with 173.0 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 1.95% to 193.4 compared with 189.7 for the previous week. The annual rate of inflation, calculated on point to point basis, for this group surged to 20.20% from 17.24% for previous week.

The index for 'Fuel & Power' with a weight of 14.91% in overall WPI on the other hand remained unchanged at its previous week's level of 150.70. The annual rate of inflation for this group too remained unchanged at 11.63%. However, the fuel inflation is still high in an absolute sense and the government is understood to have deferred a hike in diesel prices for now to help keep fuel inflation from rising further.

The top gainers on the Sensex were NTPC up 0.95%, Bharti Airtel up 0.89%, Hindalco up 0.69%, HDFC Bank up 0.66% and HDFC was up 0.52%.

Sterlite Industries down 4.04%, Bajaj Auto down 3.25%, Cipla down 2.95%, HUL down 2.87% and Maruti Suzuki down 1.78%, were the top losers on the index.

The S&P CNX Nifty trimmed 39.40 points or 0.65% to 6,040.40. The index touched a high and a low of 6,116.15 and 6,038.40, respectively. 

The top gainers on the Nifty were Sun Pharma up 1.79%, Bharti Airtel up 1.03%, HCL Tech up 0.98%, Powergrid up 0.97% and NTPC was up by 0.75%.

The top losers on the index were Ambuja Cements down 4.54%, Sterlite Industries down 4.16%, Cipla down by 3.73%, ACC down by 3.70% and Bajaj Auto down 3.21%.

In what would came as a major relief for the telecom operators, the government said on Wednesday that the security related issues that were impacting the launch of third generation (3G) services were nearly resolved and it would soon issue mew guidelines in this context.

'3G issue is almost resolved. Soon you will have new guidelines that will resolve the matter,' said the communications and IT minister Kapil Sibal. On Tuesday, union home minister P Chidambaram too had stated that while the telecom service providers needed to work out the modalities to provide interception facilities to the security agencies, it would not lead to much delay in launch of services and telcos could be allowed to rollout 3G services while interception process was still being put in place.

Asian markets are trading mixed. Shanghai Composite was down by 0.51%, Hang Seng was down by 0.15%, Jakarta Composite was down by 1.00%, KLSE Composite was marginally down by 0.07% and Seoul Composite declined 0.24%.

On the other hand, Nikkei 225 was up by 1.44%, Taiwan Weighted was up by 0.42%, and Straits Times rose 0.56%.

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