SHORT COVERING

After a horrendous performance on Wednesday, Indian benchmark indices finally pull through a relief rally on the November series futures and options expiry day and surged a percent higher. The frontline indices kept languishing below the neutral line, almost through the day but the last leg of trade saw a reversal of sorts as sentiments suddenly turned sanguine and the key gauges swiftly started gathering a lot of traction. The key gauges even managed to climb beyond the psychological 15,850 (Sensex) and 4, 750 (Nifty) levels, thanks to the hefty covering of short positions in rate sensitive Automobile and Capital Goods counters which surged by about two and half a percent and lent support to recovery. Sentiments also got buttressed after India's food inflation moderated sharply to single digit at 9.01% for the week ended November 12, its third straight week of decline. The drop in food inflation is likely to bring some relief to the government which took steps to remove supply bottlenecks and has forecasted that prices would ease from December. On the global front, sentiments across Asia appeared cautiously optimistic as a majority of indices in the region settled in green territory while the European counterparts rebounded after previous session's debacle on the back of better than expected German business sentiment data. However, cautiousness loomed across the globe amid heightened nervousness over the spreading European debt crisis contagion and disappointing US economic reports. On the domestic front, rupee showed signs of stabilization after recently touching lifetime lows, amid hopes that steps announced by the RBI would boost dollar inflows. Meanwhile, retailers including Pantaloons rallied in the session amid reports that Cabinet will consider 100% foreign direct investment (FDI) in single brand and 51% in multi-brand. Also fertilizer stocks including RCF, National Fertilizers & Chemicals Travancore spurted in the session amid reports that suppliers agreed to cut Diammonium Phosphate (DAP) and Nitrogen, Phosphorus, Potassium (NPK) price for Indian fertilizer companies.
The NSE's 50-share broadly followed index Nifty, went for a one percent rally and settled just above the psychological 4,750 support level while Bombay Stock Exchange's Sensitive Index - Sensex garnered around one hundred fifty points to close above the psychological 15,850 mark. The broader markets too showed resilience and settled with notable gains. On the BSE sectoral front, hefty short covering was evident in the rate sensitive Auto index which topped the gainers space with 2.45% gains followed by Capital Goods and TECk indices which rose 2.31% and 1.74% respectively. On the flipside, the Consumer Durables pockets remained the only chink in the armor as it settled in the negative terrain with marginal losses. On the F&O front, November series Nifty and Sensex got brutally butchered by around 8% each. From the expiry perspective, market wide rollover of 58.6% was observed which was lower than the three month average of 62.44% while Nifty rollovers were at 52.57%, lower than 3 month average of 56.55%. Sectorally, the Capital Goods, Cement, Automobile and Metal counters witnessed high rollovers while stocks from the IT, Pharma and Telecom pockets observed relatively low rolls. Among individual stocks, vast rollovers were witnessed in index heavyweights including Mundra Port (85%), Adani Power (76%), Balrampur Chini (76%), DLF (75%) and Cairn (73%) while low rollovers were seen in stocks like TVS Motors (30%), NMDC (33%), Exide (34%), Mphasis (35%) and Central Bank (39%). On expected lines, markets registered extremely large volumes of over Rs 2.74 lakh crore on the November series F&O expiry day. The turnover for NSE F&O segment remained on the higher side compared to Wednesday at over Rs 2.59 lakh crore. The market breadth remained positive as there were 1460 shares on the gaining side against 1313 shares on the losing side while 119 shares remained unchanged.
Finally, the BSE Sensex surged by 158.52 points or 1.01% to settle at 15,858.49, while the S&P CNX Nifty soared by 50.00 points or 1.06% to close 4,756.45.
The BSE Sensex touched a high and a low of 15,901.30 and 15,479.97 respectively. The BSE Mid cap and Small cap index were up by 1.40% and 0.38% respectively.
The top gainers on the Sensex were Maruti Suzuki up 4.02%, Bajaj Auto up 3.71%, Bharti Airtel up 3.65%, ONGC up 2.90 and L&T up 2.76%. While, Hindalco Industries down 1.26%, Hero MotoCorp down 0.95%, Sterlite Industries down 0.67%, ITC down 0.10% and SBI down 0.06% were the major losers on the index.
The top gainers on the BSE sectoral space were Auto up 2.45%, Capital Goods (CG) up 2.31%, TECk up 1.74%, Health Care (HC) up 1.68% and Realty up 1.34%. While Consumer Durables (CD) down 0.21% was the only loser on the BSE sectoral space.
Meanwhile, India's weekly food inflation measured by the Wholesale Price Index (WPI) slipped below double digits for the first time in five weeks at 9.01% for the week ended November 12, compared to 10.63% in the last week. For the week under review, prices of vegetables, fruits and milk showed a decline of 1.6%, however, all other food items including prices of eggs and poultry became expensive on an annual basis.
According to the data released by the Ministry of Commerce and Industry, the index for 'Food Articles' group  declined by 0.7% to 198.5 (Provisional) from 199.8 (Provisional) for the previous week due to lower prices of poultry chicken (6%), bajra and fruits and vegetables (2% each) and condiments and spices, urad, fish-inland, maize and moong (1% each). However, the prices of masur and coffee (4% each), tea (2%) and barley, ragi, fish-marine, wheat and gram (1% each) moved up.
The index for 'Non-Food Articles' group declined by 0.7% to 174.7 (Provisional) from 175.9 (Provisional) for the previous week due to lower prices of raw rubber (9%), gaur seed (3%), sunflower, groundnut seed and raw cotton (2% each) and mesta, copra, coir fibre and castor seed (1% each). However, the prices of flowers (9%), fodder and gingelly seed (3% each), linseed and raw silk (2% each) and raw jute and rape and mustard seed (1% each) moved up.
However, the index for 'Minerals' group rose by 0.4% to 310.5 (Provisional) from 309.2 (Provisional) for the previous week due to higher prices of crude petroleum (1%). As a result the index for 'Primary Articles' which accounts for 20.12% of the WPI declined by 0.5% to 201.9 (Provisional) from 203.0 (Provisional) for the previous week. The annual rate of inflation, calculated on point to point basis, stood at 9.08% (Provisional) for the week ended November 12 as compared to 10.39% (Provisional) for the previous week.
Meanwhile, the index for 'Fuel and Power' group, which accounts for 14.91% of WPI, remained unchanged at their previous week's level of 171.5 (Provisional) and 15.49% (Provisional) for the week ended November 12.
Inspite of food inflation coming into single digit after hovering above 10% mark for five successive weeks, is still significantly above the Reserve Bank of India's (RBI) comfort zone. However, this significant decline in the food inflation is expected to provide some relief to the government and RBI, which have been fighting to curb the high inflation. 
On November 23, Finance Minister Pranab Mukherjee said that 'the government's immediate priority is to contain price rise. High inflation and also some of the efforts to control liquidity has a detrimental effect on short-run growth. The immediate priority is to control inflation so that long-term growth prospects are not affected.'
Though after it had hiked rates in October the RBI said it would hold off another increase if inflation showed signs of decline, however, RBI's Governor D Subbarao said he would not hesitate to tighten rates further if inflation did not come down as expected. Overall inflation too has remained stubbornly high, near double digits, since January 2010. Headline inflation based on the wholesale price index was recorded at 9.73% in October, according to the latest data available. 
The S&P CNX Nifty touched a high and low of 4,771.10 and 4,639.10 respectively.
The top gainers on the Nifty were GAIL up 4.26%, ONGC up 4.12%, Sesa Goa up 3.73%, IDFC up 3.59% and Ambuja Cement up 3.45%. On the flip side, SAIL down 3.19%, Reliance Power down 2.61%, ACC down 1.84%, Hero MotoCorp down 1.58% and Ranbaxy down 0.62% were the top losers on the index.
The European markets were trading in green. France's CAC 40 up 1.36%, Britain's FTSE 100 up by 0.31%, and Germany's DAX up by 1.06%.

Most Asian stock markets were slightly higher on Thursday, with several exchanges reversing morning losses amid a rise in US stock futures, even as many investors remained cautious after Germany's failure to auction all the bonds it offered Wednesday. The surprising recovery in markets could be simply due to the fact that the sellers are exhausted and investors are looking to take advantage of recent share-price weakness to snap up some blue chips. China shares ended higher on Thursday, snapping six days of losses as property and financial shares turned higher. However, Nikkei average fell almost 2% to close at a two-and-a-half-year low on Thursday, hurt by a worrying German bond sale and expectations that mounting European debt concerns will continue to push overseas equities markets lower.

Earlier in the morning, Asian exchanges were lower due to continued worries over the euro zone's debt crisis after slightly less than two-thirds of the bonds offered at a German auction were sold. There were also concerns over the Chinese economy as China watchers have forecasted the world's second-biggest economy to see a slowdown in its growth momentum to 8.5% next year, due to weakening external demand and rising export prices caused by increasing wages and costs.