Indian equity indices snapped a highly choppy session of trade on a depressing note on Thursday after plunging around a percentage point as leads remained weak not only locally but globally as well. Marketmen who initially abstained from showing any knee-jerk reaction to the 25 basis point interest rate hike by RBI's, taking the frontline indices to the high point of the session in initial moments of noon trade. However, sentiments took a sudden U-turn after touching previous closing levels as investors overlooked the marginal moderation in weekly food inflation numbers and resorted to broad based position squaring following the RBI's hawkish tone on anti-inflationary measures that dented sentiments as experts did not rule out more rate hikes going forward. Things looked gloomier after RBI's statement that it feels that the April and May inflation numbers are likely to be revised higher. The other area of concern is the level of inflation in non-food manufactured goods, which is way above RBI's comfort level of 4%. However, optimists speculated that the worst may be over for the rate sensitive shares as they sensed that the interest rates in the system are close to their peak levels and that the rates are unlikely to get much higher from here on. While leads from the global front too remained bleak as investors' morale also got pounded after European stock markets exhibited somber trends on anxiety over Greece's debt situation together with weak US economic data, intensified contagion fears across Europe and fuelled concerns about a slowdown in the global economic recovery. While the Asian counterparts too traded on an extremely disappointing note, thereby giving no upside triggers to the local bourses. The overnight plunge in international crude oil prices too went unnoticed as investors were busy booking profits.
Back home, the NSE's 50-share broadly followed index Nifty, settled with another large cut of around a percent, below the crucial 5,400 support level while Bombay Stock Exchange's Sensitive Index, Sensex dived almost one hundred and fifty points lower and closed below the important psychological 18,000 level. The broader markets too succumbed to the selling pressure that was evident on the larger peers and shut shops with well over half a percent losses. The midcap index ended with 0.71% losses while the smallcap index declined by 0.54% point. On the sectoral front, it was the Information Technology counter which languished at the bottom of the table with 1.66% losses as concerns over the slowdown in the US, their biggest importers, loomed large. Heavyweights like TCS, Wipro and Infosys plunged by 2.44%, 1.99% and 1.18% respectively. While the Capital Goods sector too bore the brunt of selling pressure and shaved off 1.42% on the back of hefty profit booking in bellwethers like L&T and Crompton Greaves which sank by 2% and 4.93% respectively. Index heavyweight Reliance Industries too failed to make its presence felt as it prolonged its downtrend for the fourth straight session after being badly battered in the three previous sessions. India's largest passenger car maker Maruti Suzuki also continued its declining streak, falling over one and half a percent, in view of the ongoing worker's strike. Meanwhile cement heavyweights like UltraTech Cement, Ambuja Cements and ACC slipped in the range of 2% to 5% after reports emerged that the Serious Fraud Investigation Office (SFIO) is investigating allegations of cartelization against them. The investigation will examine the conduct of the cement companies over a 10- year period. Amid the gloomy environment, it was the defensive pockets like FMCG and Healthcare which refrained from collapsing deeper into the red terrain and settled only with marginal losses. The markets plummeted on large volumes of over Rs 1.36 lakh crore while the turnover for NSE F&O segment also remained on the higher side compared to Wednesday at over 1.22 lakh crore. Market breadth remained negative as there were 1085 shares on the gaining side against 1744 shares on the losing side while 117 shares remained unchanged.
Finally, the BSE Sensex dropped 146.36 points or 0.81% to settle at 17,985.88 while the S&P CNX Nifty lost 50.75 points or 0.93% to settle at 5,396.75.
The BSE Sensex touched a high and a low of 18,155.10 and 17,958.94, respectively. The BSE Mid cap and Small cap index were down by 0.71% and 0.54% respectively.
The major gainers on the Sensex were Reliance Infra up 2.00%, Hindustan Unilever up 1.10%, SBI up 1.09%, BHEL up 0.67% and ONGC up 0.35%.
On the flip side, TCS down 2.40%, Sterlite Industries down 2.33%, L&T down 2.00%, Wipro down 1.99% and Maruti Suzuki down 1.74% were the top losers on the index.
There was no gainer on the BSE sectoral space. The major losers in the space were IT down 1.66%, TECk down 1.42%, CG down 1.35%, Metal down 1.17% and consumer Durables (CD) down 1.10%.
With the domestic inflation persisting at uncomfortable levels, Reserve Bank of India (RBI) has furthered its aggressive stance against the rampant inflation and hiked repo rate and reverse repo rate by 25 basis points each to 7.50 per cent and 6.50 per cent respectively, in its mid-quarter policy review. While, the central bank has left cash reserve ratio, which is the amount of funds that banks have to keep with RBI, unchanged at 6 per cent. In the coming months, further increase in policy rates is possible as RBI said it will continue its tight monetary policy as inflation is spreading to non-food segment also, which is a concern. The inflation in the economy is expected to remain at elevated level because of high domestic demand and hovering global oil and commodities prices, given the current situation, central bank expects an upward revision in inflation numbers. Moreover, the headline numbers understate the pressures because fuel prices have yet to reflect global crude prices.
The headline WPI inflation rate was 9.7 per cent in March 2011. In April 2011, it was 8.7 per cent and rose to 9.1 per cent in May 2011. The numbers for April and May 2011 are as yet provisional and, given the recent pattern, these numbers are likely to be revised upwards. Thus, the headline WPI inflation rate remains elevated, consistent with the projections made in the Annual Policy Statement of May 3. The main drivers of WPI inflation in April-May 2011 were non-food primary articles, fuel group and non-food manufactured products. The consumer price inflation for industrial workers (CPI - IW) rose from 8.8 per cent in March 2011 to 9.4 per cent in April 2011.
Non-food manufactured products inflation was 8.5 per cent in March 2011. Provisional data indicate that it increased from 6.3 per cent in April to 7.3 per cent in May 2011, numbers much above its medium-term trend of 4.0 per cent. This pattern in non-food manufactured products inflation is a matter of particular concern. Besides, reflecting high commodity prices, it also suggests more generalized inflationary pressures; rising wages and costs of service inputs are apparently being passed on by producers along the entire supply chain.
On liquidity condition it said, "As articulated in the May 3 Policy Statement, the Reserve Bank will continue to maintain liquidity conditions such that neither surplus liquidity dilutes the monetary policy stance nor large deficit chokes off fund flows to productive sectors of the economy". In its mid quarter policy review RBI observed, recent global macroeconomic developments pose some risk to the growth of domestic economy. Expressing concern over unstable global environment RBI said, "Lead indicators suggests that growth moderated in both advanced economies and emerging market economies (EMEs) under the impact of high oil and other commodity prices, the spillover from the Japanese natural disasters and monetary tightening in EMEs to contain inflationary pressures. Uncertainty about the resolution of the sovereign debt problem in the euro area has increased. These developments increase downside risks to global growth prospects".
The domestic growth outlook as indicated in the Annual Monetary Statement of May 3 remains unchanged. However, given the high degree of integration with the global economy, recent global macroeconomic developments pose some risks to domestic growth. Domestic inflation remains high and much above the comfort zone of the Reserve Bank. Particularly, non-food manufactured products inflation rose in May 2011 after showing some moderation in April 2011. Domestic fuel prices do not yet reflect the current trends of global prices. Although global commodity prices moderated in recent weeks, it is too early to downgrade this as a risk factor. Monetary transmission has strengthened. The impact of the Reserve Bank's recent monetary policy actions is still unfolding. The challenge of containing inflation and anchoring inflation expectations persists.
Thus, while the Reserve Bank needs to continue with its anti-inflationary stance, the extent of policy action needs to balance the adverse movements in inflation with recent global developments and their likely impact on the domestic growth trajectory.
The S&P CNX Nifty touched high and low of 5,447.50 and 5,389.80, respectively.
The top gainers of the Nifty were Reliance Infra up 1.93%, BPCL up 1.61%, Reliance Capital up 1.55%, SBI up 1.26% and Hindustan Unilever up 1.25%.
On the flip side, Ambuja Cement down 5.42%, IDFC down 4.12%, ACC down 3.49%, TCS down 2.89% and SAIL down 2.78% were the major losers on the index.
European markets were trading on a negative note. France's CAC 40 plunged 1.18%, Britain's FTSE 100 lost 1.10% and Germany's DAX declined by 0.81%.
Asian markets witnessed a dismal trading day with all the major indices suffering sharp cut in the range of 1.5-2 percent each. Tailing their US counterparts the regional markets remained under deep pressure from the very beginning and in latter trade the selling intensified as investors reacted to fresh developments on Greece's sovereign-debt crisis. Greek Prime Minister George Papandreou said he will reshuffle his cabinet and seek a confidence vote. Both the Chinese and Hong Kong markets fell to their lowest of 2011, along with the global concerns the marketmen were concerned about a potential interest rate hike after the yield on the PBOC's three-month bills unexpectedly rose by around 8 basis points at auction on Thursday Japanese market fell as Exporters were under pressure and energy stocks too declined.
Back home, the NSE's 50-share broadly followed index Nifty, settled with another large cut of around a percent, below the crucial 5,400 support level while Bombay Stock Exchange's Sensitive Index, Sensex dived almost one hundred and fifty points lower and closed below the important psychological 18,000 level. The broader markets too succumbed to the selling pressure that was evident on the larger peers and shut shops with well over half a percent losses. The midcap index ended with 0.71% losses while the smallcap index declined by 0.54% point. On the sectoral front, it was the Information Technology counter which languished at the bottom of the table with 1.66% losses as concerns over the slowdown in the US, their biggest importers, loomed large. Heavyweights like TCS, Wipro and Infosys plunged by 2.44%, 1.99% and 1.18% respectively. While the Capital Goods sector too bore the brunt of selling pressure and shaved off 1.42% on the back of hefty profit booking in bellwethers like L&T and Crompton Greaves which sank by 2% and 4.93% respectively. Index heavyweight Reliance Industries too failed to make its presence felt as it prolonged its downtrend for the fourth straight session after being badly battered in the three previous sessions. India's largest passenger car maker Maruti Suzuki also continued its declining streak, falling over one and half a percent, in view of the ongoing worker's strike. Meanwhile cement heavyweights like UltraTech Cement, Ambuja Cements and ACC slipped in the range of 2% to 5% after reports emerged that the Serious Fraud Investigation Office (SFIO) is investigating allegations of cartelization against them. The investigation will examine the conduct of the cement companies over a 10- year period. Amid the gloomy environment, it was the defensive pockets like FMCG and Healthcare which refrained from collapsing deeper into the red terrain and settled only with marginal losses. The markets plummeted on large volumes of over Rs 1.36 lakh crore while the turnover for NSE F&O segment also remained on the higher side compared to Wednesday at over 1.22 lakh crore. Market breadth remained negative as there were 1085 shares on the gaining side against 1744 shares on the losing side while 117 shares remained unchanged.
Finally, the BSE Sensex dropped 146.36 points or 0.81% to settle at 17,985.88 while the S&P CNX Nifty lost 50.75 points or 0.93% to settle at 5,396.75.
The BSE Sensex touched a high and a low of 18,155.10 and 17,958.94, respectively. The BSE Mid cap and Small cap index were down by 0.71% and 0.54% respectively.
The major gainers on the Sensex were Reliance Infra up 2.00%, Hindustan Unilever up 1.10%, SBI up 1.09%, BHEL up 0.67% and ONGC up 0.35%.
On the flip side, TCS down 2.40%, Sterlite Industries down 2.33%, L&T down 2.00%, Wipro down 1.99% and Maruti Suzuki down 1.74% were the top losers on the index.
There was no gainer on the BSE sectoral space. The major losers in the space were IT down 1.66%, TECk down 1.42%, CG down 1.35%, Metal down 1.17% and consumer Durables (CD) down 1.10%.
With the domestic inflation persisting at uncomfortable levels, Reserve Bank of India (RBI) has furthered its aggressive stance against the rampant inflation and hiked repo rate and reverse repo rate by 25 basis points each to 7.50 per cent and 6.50 per cent respectively, in its mid-quarter policy review. While, the central bank has left cash reserve ratio, which is the amount of funds that banks have to keep with RBI, unchanged at 6 per cent. In the coming months, further increase in policy rates is possible as RBI said it will continue its tight monetary policy as inflation is spreading to non-food segment also, which is a concern. The inflation in the economy is expected to remain at elevated level because of high domestic demand and hovering global oil and commodities prices, given the current situation, central bank expects an upward revision in inflation numbers. Moreover, the headline numbers understate the pressures because fuel prices have yet to reflect global crude prices.
The headline WPI inflation rate was 9.7 per cent in March 2011. In April 2011, it was 8.7 per cent and rose to 9.1 per cent in May 2011. The numbers for April and May 2011 are as yet provisional and, given the recent pattern, these numbers are likely to be revised upwards. Thus, the headline WPI inflation rate remains elevated, consistent with the projections made in the Annual Policy Statement of May 3. The main drivers of WPI inflation in April-May 2011 were non-food primary articles, fuel group and non-food manufactured products. The consumer price inflation for industrial workers (CPI - IW) rose from 8.8 per cent in March 2011 to 9.4 per cent in April 2011.
Non-food manufactured products inflation was 8.5 per cent in March 2011. Provisional data indicate that it increased from 6.3 per cent in April to 7.3 per cent in May 2011, numbers much above its medium-term trend of 4.0 per cent. This pattern in non-food manufactured products inflation is a matter of particular concern. Besides, reflecting high commodity prices, it also suggests more generalized inflationary pressures; rising wages and costs of service inputs are apparently being passed on by producers along the entire supply chain.
On liquidity condition it said, "As articulated in the May 3 Policy Statement, the Reserve Bank will continue to maintain liquidity conditions such that neither surplus liquidity dilutes the monetary policy stance nor large deficit chokes off fund flows to productive sectors of the economy". In its mid quarter policy review RBI observed, recent global macroeconomic developments pose some risk to the growth of domestic economy. Expressing concern over unstable global environment RBI said, "Lead indicators suggests that growth moderated in both advanced economies and emerging market economies (EMEs) under the impact of high oil and other commodity prices, the spillover from the Japanese natural disasters and monetary tightening in EMEs to contain inflationary pressures. Uncertainty about the resolution of the sovereign debt problem in the euro area has increased. These developments increase downside risks to global growth prospects".
The domestic growth outlook as indicated in the Annual Monetary Statement of May 3 remains unchanged. However, given the high degree of integration with the global economy, recent global macroeconomic developments pose some risks to domestic growth. Domestic inflation remains high and much above the comfort zone of the Reserve Bank. Particularly, non-food manufactured products inflation rose in May 2011 after showing some moderation in April 2011. Domestic fuel prices do not yet reflect the current trends of global prices. Although global commodity prices moderated in recent weeks, it is too early to downgrade this as a risk factor. Monetary transmission has strengthened. The impact of the Reserve Bank's recent monetary policy actions is still unfolding. The challenge of containing inflation and anchoring inflation expectations persists.
Thus, while the Reserve Bank needs to continue with its anti-inflationary stance, the extent of policy action needs to balance the adverse movements in inflation with recent global developments and their likely impact on the domestic growth trajectory.
The S&P CNX Nifty touched high and low of 5,447.50 and 5,389.80, respectively.
The top gainers of the Nifty were Reliance Infra up 1.93%, BPCL up 1.61%, Reliance Capital up 1.55%, SBI up 1.26% and Hindustan Unilever up 1.25%.
On the flip side, Ambuja Cement down 5.42%, IDFC down 4.12%, ACC down 3.49%, TCS down 2.89% and SAIL down 2.78% were the major losers on the index.
European markets were trading on a negative note. France's CAC 40 plunged 1.18%, Britain's FTSE 100 lost 1.10% and Germany's DAX declined by 0.81%.
Asian markets witnessed a dismal trading day with all the major indices suffering sharp cut in the range of 1.5-2 percent each. Tailing their US counterparts the regional markets remained under deep pressure from the very beginning and in latter trade the selling intensified as investors reacted to fresh developments on Greece's sovereign-debt crisis. Greek Prime Minister George Papandreou said he will reshuffle his cabinet and seek a confidence vote. Both the Chinese and Hong Kong markets fell to their lowest of 2011, along with the global concerns the marketmen were concerned about a potential interest rate hike after the yield on the PBOC's three-month bills unexpectedly rose by around 8 basis points at auction on Thursday Japanese market fell as Exporters were under pressure and energy stocks too declined.
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