Local equity markets remain flat; food inflation eases

The local equity markets are trading in narrow range with negative bias in late morning session on the ahead of RBI's monetary policy announcement in the noon. Meanwhile other Asian markets too were mostly trading in red while US index futures were in green. Asian stocks declined and Japan's bond risk soared to a record on concern the nation's nuclear crisis will cripple its economy. The yen pared gains on speculation policy makers will intervene to weaken the currency. Bank home, in BSE sectoral space, IT, TECk, FMCG, Metal and Realty counters were facing some selling pressure while CG, CD, Bankex, Power and PSU stocks showed some buying interest. On the other hand, the broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices were up by 0.17% and 0.28%, respectively. The overall market breadth is in the favour of advances which have outnumbered declines in the ratio of 1296:1119, while, 109 shares remained unchanged.

Meanwhile, annual food inflation for the week ended March 5 eased to 9.42% from 9.52% recorded in the previous week as prices of onions and milk fell, while fuel inflation accelerated, on a jump in coking coal prices, from 9.48% a week earlier to 12.79%. The primary articles price index was up 12.31%, compared with an annual rise of 13.96 % in the prior week.

Apar Industries zoomed 5.89% as its conductor division has bagged order worth Rs 250 crore from Power Grid Corporation of India (PGCIL) for manufacture and supply of ACSR Conductors.Educomp Solutions surged 1.84% at its ICT division has bagged two multimedia content development projects totaling Rs 6.81 crore from the Government of Gujarat and Assam.

The BSE Sensex declined 49.86 points or 0.27% at 18,308.83. The index has touched a high of 18,354.27 and a low of 18,209.05 respectively.

The BSE Mid cap and Small cap indices were up by 0.17% and 0.28%, respectively.

The top gaining sectoral indices on the BSE were, CG up by 0.72%, CD up by 0.65%, Bankex up by 0.30%, Power up by 0.29% and PSU was up by 0.07%. While, IT down by 1.09%, TECk down by 0.66%, FMCG down by 0.64%, Metal down by 0.50% and Realty down by 0.36%, were the major losers on the index.

The top gainers on the Sensex were Reliance Communication up by 3.35%, BHEL up by 1.36%, HDFC Bank up by 1.28%, Cipla up by 0.66% and SBI up 0.65%.

Government's decision of not to hike prices of diesel despite the surge in global crude prices has while saved the common man already burdened under high inflation from another round of prices rises, it has also resulted in mounting losses of the government controlled oil marketing companies (OMCs).

According to the ministry of petroleum, the under-recovery being incurred by the fuel retailers on diesel has increased to a record high level of Rs 15.79 a litre. Overall under-recoveries of the OMCs in all the regulated fuels are likely to be close to Rs 80,000 crore for the current financial year. At present the three state controlled fuel retailers are together losing about Rs 285 crore in revenue everyday on the sale of diesel below the cost.

There was a hope that the finance ministry will cut customs and excise duty on fuels to contain the impact of a spurt in global crude oil prices, which are still ruling relatively high despite some recent correction seen following the Japan earthquake. By cutting the duties, the government could have kept prices from rising while at the same time cutting down losses of OMCs. However, that would have resulted in heavy losses to the exchequer, and therefore the finance ministry dropped the proposal.

The publically controlled OMCs sell diesel and cooking fuels at prices that are generally lower than the cost. These are generally compensated by upstream companies and the government but such compensation is often not complete and OMCs have to absorb some loses. While the government has historically born 33% of the oil subsidy, the oil ministry has been asking the government to hike its share given the surge in under-recoveries.

The oil ministry has made it clear that upstream companies, which provide discounts on crude oil supplies to downstream companies as their share of under-recovery, will not bear more than 33% of the losses of retailers. This leaves the rest to be divided between the government and downstream companies. Since the OMCs does not have the financial muscle to absorb anything more than say 10-15% of the under-recovery, the government will have to hike its share to over 50% to ensure that financial health of fuel retailers is not impacted. 

The S&P CNX Nifty trimmed 14.40 points or 0.26% at 5,496.70.The index has touched high of 5,510.05 and a low of 5,453.90 respectively.

The top gainers of the Nifty were RCom up by 3.30%, Ambuja Cement up by 2.69 %, BHEL up by1.66%, Reliance Capital up by 1.46% and Kotak Bank up by 1.39%.

The top losers of the index were Maruti Suzuki down by 2.60%, HDFC down by 1.89%, TCS down by 1.30%, Jindal Steel down by 1.29%, and GAIL was down by 1.24%.

All the Asian markets with an exception of Seoul Composite which surged  0.05% were trading in the red; Shanghai Composite shed 0.57%, Hang Seng declined 1.72%, Jakarta Composite slid 1.53%, KLSE Composite dropped 0.35%, Nikkei 225 skid 1.44%, Straits Times trimmed 1.01% and Taiwan Weighted tumbled  0.50%.

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