Sensex lackluster; Banking stocks drive markets down

Although still into the negative, the markets managed to recoup some of the losses during the previous hour of trade. The decline in the food inflation number which stood at 9.52% for the week ended February 26, 2011 as compared to 10.39% seen in the previous week has failed to cheer the markets. Global cues were also not supportive as all the Asian markets were trading in the negative territory and US index futures too were trading in the red on the back of rising crude oil prices. Back home, all the BSE sectoral indices with an exception of Auto, which was up by 0.22%, were trading in the red. The auto segment was performing relatively well as the news came in that domestic passenger car sales touched a record 1,89,008 units in February this year, a growth of 22.63% vis-à-vis the figure for the month a year ago, as customers advanced their purchases fearing a possible excise duty hike in the Union Budget. Banking segment was leading the pack of losers on the sectoral indices, followed by metal, information technology, oil & gas and public sector undertakings segments. The broader markets, although flat, out-performed the benchmarks, with the Mid-cap index declining 5.60 points and the BSE Small-cap index trading flat and down by 0.02 points. The market breadth on the BSE was in favour of declines in the ratio of 1362:1156 while 110 scrips remained unchanged.

The BSE Sensex dropped 142.43 points or 0.77% at 18,327.52. The index touched a high and a low of 18,430.84 and 18,261.26, respectively.

The BSE Mid-cap index declined 0.08%, while the BSE Small-cap remained unchanged.

All the BSE sectoral indices with an exception of Auto, up by 0.22%, were trading in the red. Bankex down 1.25%, Metal down 1.15%, Information Technology (IT) down 0.66%, Oil & Gas down 0.64% and Public Sector Undertakings (PSU) down 0.62% were the major losers in the BSE sectoral indices.

Meanwhile, food inflation in India has declined for the second successive week in late-February, after the marginal rise seen in the week-ended Feb 12. 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. The central bank is widely expected to hike the policy rates by at least 25 basis points in its policy mid-quarterly policy review on March 17. The RBI has hiked key policy interest rates seven times since last March in its bid to control inflation.

According to the data released by the ministry of commerce and industry on Thursday, food price index rose by single digits to 9.52% for the week ended February 26, 2011 as compared to 10.39% seen in the previous week. The decline was largely on the back of ease in prices of vegetables, potatoes and rice.

The inflation for primary articles for the week ended February 26, 2011 came at 13.96% as compared to 14.85% seen in the previous week. The Fuel group inflation for the week ended February 26, 2011 stood 9.48% as compared to 12.56% seen in previous week. Though the fuel inflation growth eased to some extent but it still remains at elevated levels as the risk of rising energy prices due to the prolonged civil upheaval in the Middle East and North African nations poses a challenge to policymakers' inflation management strategy as costlier fuel runs the risk of underpinning overall inflation.

The wholesale price index, the most widely watched gauge of prices in India, advanced by 8.23% in January from a year earlier, against 8.43% in December.

The top gainers on the Sensex were RCom up 2.06%, Reliance Infra up 1.92%, Hero Honda up 1.67%, Maruti Suzuki up 1.45% and M&M up 0.07%.

On the other hand, Hindalco Inds down 2.23%, Tata Power down 2.13%, ICICI Bank down 1.84%, SBI down 1.65% and Jindal Steel down 1.57% were the major losers on the index.

The country's largest two-wheeler maker, Hero Honda's promoter, Hero Investments (HIPL), have raised Rs 900 crore by pledging shares to Axis Trustee Services (ATSL). ATSL acts as a debenture trustee for non-convertible debentures aggregating to Rs 900 crore raised by HIPL. After the pledging of 0.594% by HIPL, ATSL's holding in Hero Honda will increase to 5.38% from earlier of 4.79%.

Last week, HIPL had pledged 5.32 per cent stake in Hero Honda with IL&FS Trust Company raising an estimated Rs. 1,585 crore. HIPL is one of the main shareholders of Hero Honda, holding 17.33 per cent stake in the company as on December 31, 2010.

The S&P CNX Nifty dipped 42.30 points or 0.76% at 5488.70. The index touched high of 5516.30 and a low of 5468.45 respectively.

The top gainers on the Nifty were Rel Capital up 5.07%, Reliance Infra up 1.90%, RCom up 1.86%, Maruti Suzuki up 1.27% and Hero Honda up 1.06%.

On the other hand, Tata Power down 2.50%, Hindalco Inds down 2.35%, ICICI Bank down 2%, BPCL down 1.99% and HCL Tech down 1.89% were the major losers on the index

The other Asian markets were trading in the red; Shanghai Composite dipped 1.47%, Hang Seng dropped 0.67%, Jakarta Composite shed 0.64%, KLSE Composite slipped 0.42%, Nikkei 225 plunged 1.46%, Straits Times trimmed 0.40%, Seoul Composite declined 0.99% and Taiwan Weighted plummeted 1.22%.

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