Nifty continue to trade lower; food inflation rises again

The Indian equity markets continue to trade weak in late morning session on concerns of rising crude oil prices in the global market. Meanwhile, on the domestic front, Food inflation rose to 11.49% for the week ended February 12, 2011 as compared to 11.05% seen in the previous week, which has also spread negative sentiments on the local markets. On the other hand, the other Asian markets were trading mixed while US index futures were showing uptick in screen trade. Back home, all the BSE sectoral indices were trading in red, CD and CG sector lost more than two percent while other like Oil & Gas, Auto and Bankex lost more than one percent each. The Index biggies like L&T down 3.53%, ONGC down 3.42% and RIL down 1.32% were dragging the market lower, while Hero was the top gainer which was up more than two percent on the back of, Munjal family receiving Foreign Investment Promotion Board's (FIPB) nod to raise Rs 4,500 crore from overseas investors. The broader markets were also trading in negative, the BSE Mid cap and Small cap indices were down by 1.48% and 1.22%, respectively. The markets breadth was extremely negative, losers thrashed gainers in the ratio of 1825: 647, while, 95 shares remained unchanged.

The BSE Sensex declined 248.62 points or 1.37% at 17,929.71. The index has touched a high and a low of 18,135.12 and 17,886.44, respectively.

The BSE Mid cap and Small cap indices were down by 1.48% and 1.22%, respectively.

All the sectoral indices on the BSE were trading in red, CD down 2.93%, CG down 2.37%, Oil & Gas down 1.59%, Auto down 1.57% and Bankex down 1.53% were top losers in the sectoral indices.

ONGC down 3.23%, L&T down 3.18%, Tata Motors down 2.99%, M&M down 2.77% and Tata Power down 2.66% were the top losers on the index.

While, Hero Honda up 2.96%, Bharti Airtel up 1.54%, DLF up 1.36% and Reliance Infra up 0.19% were the only gainers in BSE sensex.

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 trimmed 75.80 points or 1.39% at 5,361.55 The index has touched a high of 5,423.40 and a low of 5,347.75 respectively.

The top gainers of the Nifty were Hero Honda up 2.96%, DLF up 1.41%, Bharti Airtel up 1.31%, Cairn india up 0.865 and ACC up0.80%.

The top losers of the index were HCL Tech down 4.63%, BPCL down 3.69%, L&T down 3.53%, ONGC down 3.42% and Sesa Goa down 3.16%.

Majority of the other regional peers are trading in red. Jakarta Composite declined 0.72%, KLSE Composite declined 0.16%, Nikkei 225 tumbled 1.19%, Straits Times slid 0.27%, and Seoul Composite declined 0.74%, while Shanghai Composite advanced 0.32%, Taiwan Weighted surged 0.15% and Hang Seng increased 0.07%.

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