MARKETS STILL JITTERY

Indian benchmarks failed to extend the gaining momentum on Thursday as jittery investors chose to take profits off the table amid extreme volatility and uncertainty over the direction of market in the backdrop of lingering worries emerging from both sides of the Atlantic. Apart from the global concerns, markets also witnessed some disappointing developments on the domestic front which did not augur well with investor's sentiments. The benchmarks showed great resilience against the overnight carnage in US and European markets on the back of rumors that Societe Generale was on the verge of collapse and France could soon lose its top-notch credit rating if it is forced to bail out its banks. Though the domestic bourses soon bounced back into the green after the French bank clarified denying it as "all market rumors" and called for an investigation by France's market regulator into the source of the speculation. While ratings agencies like Standard & Poor's, Moody's and Fitch also reaffirmed France's AAA credit rating. However, the local frontline gauges failed to hold on the gains through the end of session tailing European equity indices which slipped, erasing substantial gains in early trading, despite the French bank denying rumors. Back home, the economic reports there added to pessimism were the disappointing food inflation numbers released by the government which showed that the annual rate of food inflation accelerated to four and half a month high levels to 9.90%, and the fuel price index climbed 12.19% in the year to July 30. On top of that came India's trade data, showing trade deficit widened to $11.1 billion in the month of July from $7.7 billion in June. The only positive thing about the trade numbers was that India's exports in July rose by a staggering 82% to $29.3 billion. Meanwhile, shares of sugar companies including Bajaj Hindusthan, Simbhaoli Sugars, Shree Renuka Sugars, Balrampur Chini Mills were seen trading firm on reports that an Empowered Group of Ministers (EGOM) on food headed by Finance Minister Pranab Mukherjee is scheduled to meet on August 12, 2011, to decide on allowing more sugar exports. Also, the index heavyweight Reliance Industries bucked the somber trend and settled in the positive terrain on reports that the company is planning to raise yet another $1 billion loan from the international market while one of its arm is planning to raise Rs 2,500 crore via 10-year bonds at 10.25%.

Earlier on Dalal Street, the indices slipped by around half a percent on the opening bell as sentiments remained influenced by the Asian markets which mostly traded on a weak note tracking gloomy global cues. After hitting lowest levels in the early trades the equity indices slowly but steadily recuperated and clawed back into the green zone in early noon trades. But the key indices struggled to hold on to the gains amid deteriorating cues from the European stock markets and failed to negotiate a close in the green terrain and settled around the day's lows. Eventually the NSE's 50-share broadly followed index Nifty, slipped by around half a percent to settle below the crucial 5,150 support level while Bombay Stock Exchange's Sensitive Index, Sensex shed over seventy points and ended above the psychological 17,050 mark. The broader markets too traded without any fervor and closed in line with their larger peers.  On the sectoral front, the rate sensitive counters like Banking and high beta Real Estate did the maximum damage and shaved off around a percent. Information Technology pocket once again bore the brunt of hefty selling pressure as the worries over global economic slowdown did not augur well for the Indian IT industry which relies heavily on outsourcing work from US and European region. The markets slipped on weaker volumes of over Rs 1.20 lakh crore while the turnover for NSE F&O segment also remained on the lower side compared to Wednesday at over 1.07 lakh crore. The market breadth too remained pessimistic as there were 1336 shares on the gaining side against 1481 shares on the losing side while 113 shares remained unchanged.
Finally, the BSE Sensex lost 71.11 points or 0.42% to settle at 17,059.40, while the S&P CNX Nifty declined by 22.70 points or 0.44% to close at 5,138.30.
The BSE Sensex touched a high and a low of 17,207.82 and 17,012.95, respectively. The BSE Mid cap and Small cap indices were down by 0.16% and 0.19% respectively.
The top gainers on the Sensex were HDFC up 2.34%, NTPC up by 1.51%, Coal India up by 1.17%, Hindalco Inds up by 1.06% and ITC up 0.48%. On the flip side, Tata Power down 4.31%, Maruti Suzuki down 2.52%, Jindal Steel down 2.43%, Bharti Airtel down 2.42% and ICICI Bank down 2.20% were the top losers on the index.
The only gainer on the BSE sectoral space was FMCG, up by 0.03%. While, Bankex down 1.04%, TECk down by 0.86%, Realty down by 0.86%, Consumer Durables (CD) down 0.84% and Capital Good (CG) down 0.69% were the top losers on the BSE sectoral space.
Meanwhile, prolonging the previous week uptrend, India's food inflation measured by Wholesale Price Index (WPI) has spiked up at 4-1/2-month high of 9.90% for the week ended July 30 from 8.04% in the last week on the back of costlier onions, fruits, vegetables and protein-based items.
According to the data released by Ministry of Commerce and Industry, the index for Food Articles group rose by 1.6% to 195.3(Provisional)  from 192.2 for the previous week due to higher prices of fish-inland (17%), poultry chicken and fish-marine (4% each), ragi and fruits and vegetables (2% each) and rice, coffee and gram (1% each). However, the prices of egg, mutton, urad and arhar (1% each) declined.
Meanwhile, the index for 'Non-Food Articles' rose by 0.5% to 175.8 (Provisional) from 174.9 in the previous week due to higher prices of gaur seed and coir fibre (7% each), soyabean (5%), castor seed and gingelly seed (4% each), niger seed (3%), sunflower and rape and mustard seed (2% each) and copra, cotton seed and raw cotton (1% each). 
More importantly, the index for primary articles group which has the highest weightage of 20.12% in WPI rose by 1.2% for the week at 199.3 (Provisional) from 196.9 in the previous week. The annual rate of inflation, calculated on point to point basis, stood at 12.22% (Provisional) for the week ended June 30, 2011 as compared to 10.99% for the previous week ended July 23, 2011. 

Additionally, the index for Fuel & Power group which has the weightage of 14.91% in WPI rose by 0.1% to 165.7 (Provisional) from 165.6 for the previous week due to higher prices of lubricants (2%). Meanwhile, the annual rate of inflation, calculated on point to point basis, stood at 12.19% (Provisional) for the week as compared to 12.12% for the previous week.

The latest numbers are likely to put further pressure on the government and the Reserve Bank, who have been battling the high rate of price rise over a period of one-and-a-half years. Further to add on to the pressure, this is the highest rate of price rise in food items since the week ended March 12, when food inflation stood at 10.05%. India's central bank so far has raised interest rates 11 times since March 2010 to tame headline inflation, which quickened to 9.44% in June.
In its Economic Outlook for 2011-12 released earlier this month, the Prime Minister's Economic Advisory Council projected headline inflation to remain high at around 9% till October. He said that the rate of price rise will ease from November, declining to around 6.5% by March 2012. However, the report also stated that while pressure from food inflation has fallen in recent months, the rate of price rice still remains quite high, with the possibility of a further surge in coming months.  The S&P CNX Nifty touched high and low of 5,184.95 and 5,121.00, respectively.
The top gainers of the Nifty were HDFC up 2.68%, Reliance Infra up 2.65%, Reliance Capital up 2.42%, Kotak Bank up 2.16% and NTPC up 1.31%.
On the flip side, Tata Power down 4.60%, Axis Bank down 3.05%, Maruti down 2.95%, Bharti Airtel down 2.91 and BHEL down 2.27% were the top losers on the index.
The European markets were trading in mixed. France's CAC 40 lost 0.04%, Britain's FTSE 100 higher by 0.77% and Germany's DAX gained by 0.66%.
Most of the Asian equity indices finished the day's trade in the negative terrain on Thursday but closed off their early lows as bargain buyers circled back into equities on attractive valuations. Initially, the regional markets took a hit on opening after Wall Street slumped overnight -- with each of the three main indexes losing more than four percent -- while the sentiments also remained dampened after European woes reignited on Wednesday when rumours circulated that France was in danger of seeing its top-notch credit downgraded, following last week's historic cut to the United States' rating. Moreover, Singapore shares fell by midday on Thursday, weighed by oil rig builders on continuing worries about demand however, South Korean index Seoul Composite reversed course to close up by over half a percent after opening four percent lower in the trade, helped by steady institutional and pension fund buying.