NEGATIVE TERRITORY

The key equity indices have made further inroads into the negative territory during the previous one hour of trade as monthly inflation data was released. April inflation stands at 8.66% versus 9.04% reported for March. Investors also reacted to the news of biggest-ever petrol rate hike of Rs 5 per litre, by oil marketing companies (OMCs) over the weekend, stroking fears that inflation could rise further and a surge in inflation could result in a sharp hike of key interest rates by Reserve Bank of India (RBI). As regards global markets, rest of the Asian markets barring KLSE Composite, which was up by 0.03 points, were trading in the red. The US index futures were also trading in the negative territory. Back home, all the sectoral indices on the BSE with an exception of Healthcare (HC), which was up by 0.86% were trading in the red. Auto segment was leading the decline followed by realty, metal, banking and oil & gas. The broader markets are also under severe pressure, and mirroring their fall, the BSE Midcap and Small-cap indices have lost 0.52% and 0.35%, respectively. The market breadth on the BSE was in favour of declines in the ratio of 1393:994 while 105 scrips remained unchanged.

The BSE Sensex plunged 163.21 points or 0.88% at 18,368.07. The index has touched a high of 18,492.68 and a low of 18,357.11, respectively.

The BSE Mid cap and Small cap indices lost 0.52% and 0.35%, respectively.

All the sectoral indices on the BSE with an exception of Healthcare (HC), which was up by 0.86% were trading in the red. Auto down 1.34%, Realty down 1.28%, Metal down 1.22%, Bankex down 1.02% and Oil & Gas down 0.89% were the major losers in the BSE sectoral space.

The top losers on the Sensex were M&M down 2.93%, Hindalco Inds down 2.75%, JP Associates down 2.51%, Rel Infra down 2.43% and ONGC down 2.28%.

On the flip side, Hero Honda up 1.47%, Bharti Airtel up 1.31%, BHEL up 0.87%, TCS up 0.52% and HUL up 0.42% were the only gainers on the index.

After the five state election results, the UPA government allowed its Oil Marketing Companies (OMCs) to increase the price of petrol by Rs 5; this is the second time in this calendar year. The government is also expected to increase the prices of other petroleum products like diesel, LPG and kerosene. At present, diesel which is being sold at Rs 16.17 lower than the benchmark price and kerosene and LPG is being sold at a loss of Rs. 29.69 a litre and Rs 329.73 on every 14.2 KG LPG cylinder, respectively.

Petrol price was officially decontrolled on June 26, 2010 under Petroleum Minister Murli Deora. The increase was then Rs 3.50 a litre. Successive hikes in petrol prices after decontrol had pushed up prices by almost Rs 7 till then.  Since then prices have been hiked seven times, except in Mumbai where it marginally came down once. Despite decontrol and international prices rising, oil companies did not raise prices since January 2011. Last such hike was in December 2008 when petrol cost Rs 50.56 a litre. Now petrol will cost Rs 68.33 from Rs. 63.00 in Mumbai, and Rs 63.37 from Rs. 58.37 in Delhi. This is the steepest ever hike since December 2008 and a second one in the calendar year.

The OMCs said that the last increase in price was only 50% of the required increase. The full price increase has not passed on to consumers. At present OMCs are incurring a loss of Rs 10.50 on every litre of petrol. Bharat Petroleum (BPCL) hiked price by Rs 4.99 a litre and Hindustan Petroleum (HPCL) by Rs 5.01. The revenue loss on petrol that includes a portion of marketing margins now stands reduced by half. "Despite very high global crude oil prices and a huge debt burden of oil companies, the increase is only moderate keeping the consumers' interest in view," said an Indian Oil statement.

Increase in fuel prices can further push up inflation which is ruling at 8.98%. Since diesel and petrol has a combined weight age of 5.76% in the Wholesale Price Index. The fuel Price Index was 12.25% for the year to April 30, 2011. The Union Finance Minister Pranab Mukharjee has already indicated that the country's GDP growth might be lower than the target of 9% by a per cent age point due to inflationary pressure coming from oil prices.

The S&P CNX Nifty dropped 39.65 points or 0.72% at 5505.10.  The index has touched a high and a low of 5541.80 and 5498.95, respectively.

The top gainers of the Nifty were Ranbaxy Lab up 3.64%, Sun Pharma up 2.88%, Ambuja Cement up 2.24%, Bharti Airtel up 1.55% and Hero Honda up 1.42%.

On the flip side, M&M down 2.95%, Rel Infra down 2.45%, JP Associates down 2.34%, Hindalco Inds down 2.32% and ONGC down 2.18% were the major losers on the index.

Rest of the Asian markets barring KLSE Composite, which was up by 0.03 points, were trading in the red. Shanghai Composite declined 0.36%, Hang Seng plunged 1.22%, Jakarta Composite dipped 1.04%, Nikkei 225 plummeted 0.85%, Straits Times shed 0.81%, Seoul Composite dropped 0.45% and Taiwan Weighted lost 1.05%.