Benchmarks turn negative after a decent start

The Indian equity markets after making a decent start taking positive cues from the firm Asian counterparts, have it slipped into the red, paring all of their initial gains on account of rise in international crude oil prices and sustained selling witnessed by foreign funds. The US markets surged overnight on the optimistic tone of the Fed after its two-day policy meeting and most of the Asian indices were trading in the positive terrain at this point of time. Back home, on the sectoral front capital goods witnessing the maximum gain in trade followed by consumer durables and banking while, realty, oil and gas and software stocks remained the top losers on the BSE sectoral space. However, the broader indices were outperforming benchmarks. Meanwhile, PSU oil marketing companies viz., Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Indian Oil Corporation were trading lower by about half a percent in the trade on the back of higher crude oil prices. The market breadth on the BSE remained on the positive side; there were 898 shares on the gaining side against 735 shares on the losing side while 69 shares remained unchanged. Trade may remain volatile today as it being the expiry day for the April F&O series.

The BSE Sensex opened at 19,532.85; about 84 points higher as compared to its previous closing of 19,448.69, and has touched a high and a low of 19,542.05 and 19,391.28, respectively.The index is currently trading at 19,432.46, down by 16.23 points or 0.08%. There were 10 stocks advancing against 20 declines on the index.

The overall market breadth remained on the positive side with 52.76% stocks advancing against 43.18% declines. The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices gained 0.13% and 0.36%, respectively.

The top gaining sectoral indices on the BSE were, CG up by 0.37%, CD up by 0.35%, Bankex up by 0.19%, PSU up by 0.16% and HC was up by 0.09%. While Realty down by 0.78%, Oil and Gas down by 0.35%, IT down by 0.22%, TECk down by 0.17% and Metal down by 0.14% were the top losers on the index.

The top gainers on the Sensex were ONGC up by 0.95%, Sterlite Industries up by 0.79%, ICICI Bank up by 0.76%, Bajaj Auto up by 0.47% and L&T was up by 0.46%.

On the flip side, RCom down by 1.24%, Jindal Steel down by 1.16%, Maruti Suzuki down by 0.87%, Jaiprakash Associates down by 0.82% and RIL down by 0.70% were the top losers on the index.

Meanwhile, Even as the Reserve Bank of India (RBI) tightens monetary policy to curb a sticky inflation, analysts expect the pace of rising prices to remain strong over the current fiscal as well. Nomura India has in its latest research report pegged the average headline inflation for the country in current fiscal at 8.6%.

The research desk of Nomura expects the high inflation to persist throughout FY12 despite the 100 basis points (bps) cumulative hike in repo rate by central bank it is counting on. 'We expect Wholesale Price Index (WPI) inflation to average 8.6% year-on-year in FY12 from 9.4% in FY11,' it said, adding the RBI will continue its monetary tightening amidst an inflationary atmosphere.

One of the reasons given by Nomura behind its view on inflation is that costs have not been yet fully passed on to consumers. For example, even as the global crude prices (in terms of Brent crude) remain above the $120 a barrel mark, the retail fuel prices in India are still aligned to a crude prices of around $75 a barrel, the rest constituting the under-recovery of publically controlled oil marketing companies (OMCs). However, even if crude softens a bit, government will at some stage have to pass on partially the difference between local and global prices to consumers.

Further, Nomura said that even as the output prices have shown considerable uptic, cost inflation is so high that margins continue to remain under pressure. This is particularly so in cases where raw material is primary in nature. For instance textile industry is facing pressure on margins despite surge in output inflation in wake of the fact that cotton prices have nearly doubled over the last one year.

Regarding the March inflation numbers, Nomura noted that it was significantly above the expectations of both the monetary authority as well as the government and will put additional pressure on the RBI to further hike benchmark rates. Headline inflation stood at 8.98% in March, surpassing nearly by 100 bps the three-times upwardly revised forecast of RBI at 8%. Worse, the manufacturing inflation jumped sharply to 6.21%, indicating the economy was close to getting over heated. Nomura however expects the core inflation to accelerate to around 8% by September.

The S&P CNX Nifty opened at 5,851.35; about 18 points higher compared to its previous closing of 5,833.90, and has touched a high and a low of 5,856.40 and 5,814.30 respectively.The index is currently trading at 5,826.60, lower by 7.30 points or 0.13%. There were 17 stocks advancing against 32 declines while one stock remained unchanged on the index.

The top gainers of the Nifty were ONGC up by 1.00%, Sterlite Industries up by 0.96%, Siemens up by 0.75%, ICICI Bank up by 0.75% and HCL Tech up by 0.72%.

Cairn down by 1.64%, Jindal Steel down by 1.28%, RCom down by 1.19%, Maruti Suzuki down by 0.84% and PNB was down by 0.79%, were the major losers on the index.

Most of the Asian peers were trading in the green; Hang Seng was up 120.59 points or 0.50% to 24,013.43, Jakarta Composite was up 7.02 points or 0.18% to 3,811.95, KLSE Composite was up 3.92 points or 0.26% to 1,533.83, Nikkei 225 was up 136.89 points or 1.41% to 9,828.73, Straits Times was up 13.93 points or 0.44% to 3,196.61 and Seoul Composite was up 1.99 points or 0.09% to 2,208.69.

On the flip side, Shanghai Composite was down 2.33 points or 0.08% to 2,923.08 and Taiwan Weighted was down 12.82 points or 0.14% to 9,036.43 

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