Benchmark equity indices trades near their day’s low

The benchmark equity indices are trading near their day's low in the late afternoon session after the RBI hiked its benchmark interest rates by 25 basis points to tame inflation and Oil rose for a second day in New York as fighting in Libya, Africa's third-largest producer, renewed concern that Middle East supplies may be threatened by escalating civil unrest. Brent crude for May settlement advanced $1.09, or 1 percent, to $111.69 a barrel on the London-based ICE Futures Europe exchange. Meanwhile most of the Asian markets trading in negative but European markets trading higher and US index futures also trading higher. Back home, most of the sectors indices trading lower but Power indices were showing some strength. The broader markets were also feeling the heat trading lower; the BSE Mid-cap index and Small-cap index lost 0.40%and 0.36% respectively. The market breadth on the BSE was negative; the losers thrashed the gainers in a ratio 1635:1072 and 137 shares were unchanged.

The BSE Sensex shed 221.75 points or 1.21% at 18,136.94. The index touched a high and a low of 18,354.27 and 18,136.94, respectively.

All the sectoral indices on the BSE barring Power up 0.01% are trading in red.  IT down by 1.55%, Auto down by 1.52%, FMCG down 1.41%, Metal down 1.22% and TECk by 1.22%.

The top gainers on the Sensex were Reliance Communication up by 3.64%, BHEL up by 1.76%, Cipla up by 0.66% , Tata Power up 0.32% and JP Associates up 0.65%.

Maruti Suzuki down by 4.46%, HDFC down by 3.39%, Hindalco down by 2.22% , Tata Motors  down by 1.95% and Infosys down by  1.73% were the top losers on the index.

In an expected move, the Reserve Bank of India hiked its benchmark policy rates for eights time in the current fiscal on Thursday. It hiked both the repo rate and the rate at which it lends to banks, and reverse repo rate or the rate at which it allows banks to park their surplus liquidity with it, by 25 basis points (bps) each.

The move was largely expected but the analyst community, particularly after the unexpected increase seen in the headline inflation for the month of February. The wholesale price index (WPI) based inflation in the country had inched up in February to 8.31% compared with market expectations of around 7.8%. The increase was largely contributed by a pickup in core inflation, thus putting pressure on the central bank all the more to further tighten the monetary stance.

In the policy review released today, the central bank also accepted the increasingly sticky nature of inflation. It noted that following the slight moderation in January, headline WPI inflation had reversed in February 2011 accompanied by a sharp increase in non-food manufactured products inflation, or the core inflation.

This has also led the central bank to raise its fiscal-end inflation projection. In its third quarter review, the central bank had projected year-on-year WPI inflation for March 2011 at 7%.  However, further upside risks have stemmed from high international crude prices, their impact on freely priced petroleum products, and the increase in administered coal prices and pick-up in non-food manufactured product prices.  As a result, the RBI has now pegged the March-end 2011 inflation at around 8%.

The central bank however sounded confident on growth despite the weaker industrial growth numbers. It noted that even though the index of industrial production (IIP) continues to be volatile, other indicators, such as the latest Purchasing Managers' Index (PMI), direct and indirect tax collections, merchandise exports and bank credit, suggested that the growth momentum remained strong. Lead indicators of services sector activity also remain robust while the increase in area under the Rabi crop on annual basis argued well for the farm sector as well. It did however accept that global scenario was getting a bit more uncertain and even as growth seemed to be improving in developed countries as well, the surging commodity prices were a cause of worry.

The central bank concluded that the underlying inflationary pressures had accentuated, even as some risks to growth were emerging, particularly the surging global commodity prices.  As domestic fuel prices are yet to adjust fully to global prices, risks to inflation remain clearly on the upside, reinforced by the persistence of demand-side pressures as reflected in non-food manufacturing inflation. Overall, the tone of the policy was not as hawkish as some analysts expected and it did had space for some growth related worries as well even as the inflation concerns remained in top. 

The S&P CNX Nifty trimmed 66.80 points or 1.21% at 5,444.35. The index touched high of  5510.05 and a low of 5,442.75 respectively.

The top gainers on the Nifty were RCom up 3.25%, BHEL up 1.80%, Ambuja Cement up 1.54%, Cairn up 1.22% and Kotak Bank up 1.03%.

On the other hand, Maruti down 4.64%, HDFC down 3.25%, Hinadalco down 2.58%, Tata Motors down 2.39% and AXIS Bank  down 2.15% were the major losers on the index.

All other Asian markets barring Seoul Composite advanced 0.05% settled in red. Shanghai Composite declined 1.14%, KLSE Composite tumbled 0.02%, Nikkei 225 shed 1.44%, Straits Times dipped 0.69%, Taiwan Weighted dropped 0.50%, Hang Seng plunged 1.83% and Jakarta Composite plummeted 1.34%. 

European markets were trading in green. FTSE surged 0.84%, DAX advanced 1.25% and CAC-40 climbed 1.37%.

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