GAINING STRENGTH

The domestic equity markets continued their upmove for the fourth consecutive day as India's food inflation eased significantly over the week-ended Feb 5, and stood at 11.05% compared with 13.07% recorded in the previous week, maintaining its sharp downward trajectory for second consecutive week. The NSE Nifty is trading above the crucial 5,500 mark but it is still trading below its 200 day moving average, and BSE Sensex too is trading above its psychological 18,400 level. As regards global markets, while Asian markets were trading in the mixed range, US index futures were also flat in the trade at this point of time. Back home, almost all sectoral indices are trading in the green. Banking, capital goods, consumer durables and metal are leading the pack of gainers; while oil & gas and fast moving consumer goods are trading flat and down by 0.09% and 0.08%, respectively. The BSE Mid-Cap and Small-Cap indices outperformed their larger counterparts gaining 0.96% and 1.13%, respectively. The market breadth on the BSE was positive; the gainers outpaced the losers in a ratio of 1662:921 while 117 shares remained unchanged.

The BSE Sensex surged 105.09 points or 0.57% at 18,405.99. The index touched a high and a low of 18,425.32 and 18,233.79, respectively.

The BSE Mid-cap and Small-cap indices rose 0.96% and 1.13%, respectively.

In BSE sectoral space Bankex up 0.96%, Capital Goods (CG) up 0.81%, Consumer Durables (CD) up 0.80%, Metal up 0.79% and TECk up 0.68% were the major gainers; while Oil & Gas down 0.09% and Fast Moving Consumer Goods (FMCG) down 0.08% were the only losers on the BSE sectoral space.

Meanwhile, food inflation in the country eased significantly over the week-ended Feb 5, maintaining its sharp downward trajectory for second consecutive week. Overall trend in the food inflation however continues to remain volatile though the strong Rabi harvest expected this year should help the pace of rising prices in this space to come down in coming weeks.

According to the data released by the ministry of commerce and industry on Thursday, food price index rose 11.05% on annual basis during week-ended Feb 5, significantly slower compared with 13.07% recorded in the previous week. On a sequential or week-on-week basis, the index for food goods decreased by 2.14% to 182.9 from 186.9 for the previous week, mainly due to lower prices of fruits & vegetables (8%) and pulses (1%). This was second consecutive sharp decline in food prices index, indicating that supply side scenario was improving.

The index for 'Non-Food Articles' group too declined by 1.2% to 181.3 compared with 183.5 in the previous week. As a result, the broader 'Primary Articles' index, which has a weight of 20.12% in the overall wholesale price index (WPI), decreased by 1.7% to 188.5 compared with 191.8  for the previous week. The annual rate of inflation, calculated on point to point basis, for this group also decreased to 14.59% from 16.24% for the previous week.

The index for 'Fuel & Power' with a weight of 14.91% in overall WPI on the other hand increased by 0.1% to 152.1 compared with 151.9 in the previous week due to higher prices of aviation turbine fuel (5%) and furnace oil (1%). The annual rate of inflation for this group too inched up marginally to 11.92% compared with 11.61% in the previous week.

The sharp decline seen in food prices, particularly the index itself, over the last two weeks 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 and has seen a lot of pressure to take more bolder steps than the 25 basis points hike in short term lending rates it has been implementing since the start of the current fiscal. If the declining trend in food prices continue, it will ease the pressure on central bank to impermanent another hike of at least 25 bps in forthcoming policy mid-quarterly review in March.

The top gainers on the Sensex were HDFC Bank up 2.45%, HDFC up 2.30%, Bharti Airtel up 1.94%, Bajaj Auto up 1.67% and Sterlite Inds up 1.28%.

Tata Power down 0.78%, Wipro down 0.72%, ONGC down 0.25%, ITC down 0.19% and NTPC down 0.17% were the top losers on the index.

Amidst concerns raised by the commerce and industry ministry that liberal foreign direct regime in the pharma sector was leading to overtaking of Indian companies by global majors, the Organization of Pharmaceutical Producers of India (OPPI) has opposed any move to rollback the FDI regime saying it would be a retrograde step.

The department of industrial policy and promotion (DIPP) had earlier written a note to the finance ministry asking it to consider tightening the FDI regulations in the pharma space. Currently, 100% foreign investment is allowed in the pharmaceutical sector through the automatic route. The DIPP had however proposed that the FDI norms for the sector should be changed to route foreign investment through a suitable government agency like foreign investment promotion board (FIPB).

The reason behind the proposal by the commerce ministry was that multinational pharma giants were increasingly looking towards acquiring Indian drug players. Already some of the domestic heavyweights have sold their business fully or in part to multinational players. The trend however threatens to put the healthcare system in the country at mercy of foreign players and both commerce and health ministries have raised concerns about it.

The DIPP has pointed out two major negative impacts of the MNCs taking over the Indian companies. First, after the takeover, the multinationals will use the domestic unit as per their global plans and there would be little in it specifically for Indian needs. Secondly, the takeovers also have implications for affordability of healthcare as pricing of drugs might rise significant under the large foreign companies.

While the finance ministry is yet to make any decision, the commerce ministry have been urging for some announcement in this regard to be made in forthcoming Budget to be presented on Feb 28. However, most industry representatives have opposed the move in meetings with both the finance and commerce ministry. In this wake, the finance ministry, particularly given the already declining trend in FDI, is unlikely to be very enthusiastic towards commerce ministry's suggestion.

The S&P CNX Nifty jumped 41.60 points or 0.76% to 5523.30. The index touched a high and a low of 5524.40 and 5463.40, respectively. 

The top gainers of the Nifty were IDFC up 3.64%, Ambuja Cement up 3.16%, HDFC up 2.97%, HDFC Bank up 2.59% and Sun Pharma up 2.32%.

The top losers of the index were GAIL down 1.21%, HCL Tech down 0.79%, Tata Power down 0.70%, Wipro down 0.67% and Rel Capital down 0.55%.

Majority of the Asian markets were trading in the red; Shanghai Composite declined 0.03%, Hang Seng shed 0.04%, Straits Times slipped 0.24%, Seoul Composite drifted lower by 0.60% and Taiwan Weighted dropped 0.33%, while Jakarta Composite added 0.04%, Nikkei 225 gained 0.26% and KLSE Composite rose 0.30%.