Benchmarks tumble further as bearish sentiment spreads across the markets

Key benchmark equity indices have plunged way below their psychological levels as sentiments are extremely bearish, dampened by a series of negative factors such as rising crude oil prices in global market amid the spiraling crisis in Libya. Further, domestic cues are also not very encouraging since food inflation in the country inched up marginally over the week-ended Feb 12, breaking its downward trajectory seen in previous two weeks. The food inflation of the country stood at 11.49% on annual basis during week-ended Feb 12, marginally higher compared with 11.49% recorded in the previous week. Also, cautious approach adopted by participants on the last day of monthly expiry in the derivatives segment on the NSE is addition to the woes of the market. On the global front, while most of the Asian markets are trading in the red, the US index futures are also showing down-tick in screen trade today. Back home, the Bombay Stock Exchange (BSE) benchmark Sensex and the National Stock Exchange (NSE) index Nifty are trading below their 18,000 and 5,400 levels, respectively. All the sectors are trading in the red. Consumer Durables, Capital Goods, Auto, Oil & Gas and Metal segments witnessed maximum selling pressure. Index heavyweights such as RIL, Infosys, ICICI Bank, L&T, ONGC, etc. are all further dragging the markets lower. Midcap and smallcap stocks are also under severe pressure, and mirroring their fall, the BSE Midcap and Smallcap indices have now lost around 1.76% and 1.38%, respectively. The market breadth on the BSE, however, remained in favour of declines; there were 1905 shares on the losing side against 658 shares on the gaining side while 103 shares were unchanged.

The BSE Sensex plunked 270.43 points or 1.49% at 17,907.90. The index touched a high and a low of 18,135.12 and 17,886.44, respectively.

The BSE Mid-cap and Small-cap indices plunged 1.76% and 1.38%, respectively.

All the BSE sectoral indices were trading in the red with deep cuts. Consumer Durables (CD) down 3.39%, Capital Goods (CG) down 2.38%, Auto down 1.96%, Oil & Gas down 1.94% and Metal down 1.69% were the major losers.

Meanwhile, food inflation in the country inched up marginally over the week-ended Feb 12, breaking its downward trajectory seen in previous two weeks. Overall trend in the food inflation however continues to remain on the downside probably as the food prices index itself went down. This signals that the strong Rabi harvest expected this year should help the pace of rising prices in this space to come down in coming weeks and months.

According to the data released by the ministry of commerce and industry on Thursday, food price index rose 11.49% on annual basis during week-ended Feb 12, marginally higher compared with 11.49% recorded in the previous week. However, and more importantly, on a sequential or week-on-week basis, the index for food goods decreased by 0.27% to 182.4 from 182.9 for the previous week, mainly due to lower prices of fruits and vegetables (5%). This was third consecutive decline in food prices index, indicating that supply side scenario was improving.

The index for 'Non-Food Articles' group however increased substantially by 3.2 % to 187.1 compared with 181.3 in the previous week. As a result, the broader 'Primary Articles' index, which has a weight of 20.12% in the overall wholesale price index (WPI), also increased by 0.5% to 189.4 compared with 188.5 for the previous week. The annual rate of inflation, calculated on point to point basis, for this group also increased to 15.77% from 14.59% for the previous week.

The index for 'Fuel and Power' with a weight of 14.91% in overall WPI on the other hand increased by 0.2% to 152.4 compared with 152.1 in the previous week due to higher prices of furnace oil and naphtha (2% each). The annual rate of inflation for this group too inched up marginally to 12.14% compared with 11.92% in the previous week.

Even as the food inflation has increased marginally over the latest reported week, the important thing to be watched here is that food prices index has continued to go down on a sequential basis, albeit at a slower pace compared with last couple of weeks. What this indicates is that food prices are coming down following a very strong Kharif harvest and likely to surge in the Rabi harvest.

This will provide the much needed comfort to the Reserve Bank of India (RBI) which has been accused to be 'behind the curve' in fighting inflation and has seen a lot of pressure to take more bolder steps than the 25 basis points hike in short term lending rates it has been implementing since the start of the current fiscal. If the declining trend in food prices continues in coming weeks as well, it will ease the pressure on central bank to impermanent another hike of at least 25 bps in forthcoming policy mid-quarterly review in March.

The top losers on the Sensex were JP Associates down 3.69%, L&T down 3.17%, Tata Motors down 3.09%, M&M down 2.91% and Tata Power down 2.64%.

On the flip side, Hero Honda up 2.55%, DLF up 1.18%, Bharti Airtel up 1.10% and Cipla up 0.12% were the only gainers on the index.

Even as the domestic inflation remains at elevated levels, mainly because of high food commodities' prices, the farm and agriculture ministry has urged the government to clear exports of commodities like sugar and wheat where the domestic production is expected to surge this year.

'This is the right time to give serious thought over allowing exports of certain quantities of rice, wheat and sugar as we have ample stocks. World prices are very good while harvest looks favourable,' Farm and Agriculture minister Sharad Pawar said on Wednesday. He however added that exports should be allowed only to the extent where it does not hurt domestic consumers. 

Farm ministry has been saying that allowing exports will ensure that prices of commodities whose domestic production is set to surge does not plunge too much domestically. Too low prices would discourage the farmers from planting these commodities next year and there would be apprehensions of shortage. For instance, the cyclic movement of sugar prices in India is mainly because sugar prices slump at the end of each cycle, leading to lower production in next year.

In case of sugar, the government has been deliberately allowing 0.5 million tonne of exports under the open general license (OGL). The India Sugar Mills Association (ISMA) has projected the sugar output at over 25 million tonne for this season. This will leave a surplus of around 2 million tonne after accounting for domestic consumption. Some of this has been allowed to be exported already under the advance license scheme and the rest of un-exported surplus would replenish the exhausted stock over last couple of years.

In case of wheat the agriculture ministry had projected recently in its second advance estimates that production in current year will surge to a record high of 84 million tonne. The US department of agriculture too has projected India's wheat crop at record levels. The stock scenario is already good. As on February 1, the country's wheat stocks were at 19.4 million tonne, substantially higher than the mandatory required level of 8.2 million tonne. As a result, there is ample scope of exports, particularly given the high global prices.

The S&P CNX Nifty plummeted 84.50 points or 1.55% to 5352.85. The index touched a high and a low of 5423.40 and 5347.75, respectively. 

The top losers on the Nifty were HCL Tech down 4.27%, Rel Capital down 3.90%, JP Associates down 3.70%, BPCL down 3.45% and L&T down 3.30%.

On the flip side, Hero Honda up 2.31%, DLF up 1.52%, Cairn India up 0.86%, Bharti Airtel up 0.85% and Sun Pharma up 0.35% were the only gainers on the index.

Most of the Asian markets were trading in the red. Hang Seng dipped 0.21%, Jakarta Composite plunged 0.56%, KLSE Composite lost 0.61%, Nikkei 225 slid 1.19%, Straits Times declined 0.33% and Seoul Composite shed 0.60%; while, Shanghai Composite rose 0.41% and Taiwan Weighted gained 0.15%.

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