CAUTION PREVAILS

Thursday's session turned out to be a lackluster one for the Indian stock markets as the optimism that was evident in afternoon trade fizzled out completely by the end, leading the benchmark equity indices to a flat closing around the neutral line. The session was characterized by choppiness as the key indices gyrated in a tight range through the day. Investors lacked conviction to open fresh positions amid uncertainties surrounding the European region. The psychological 4,780 (Nifty) and 16,900 (Sensex) levels once again proved as tough nuts to crack for the frontline indices despite repeated attempts to claw beyond those levels. Buying interests in the beaten down rate sensitive counters like Automobile and Capital Goods index prevented the benchmarks from sinking deeper into the negative terrain however, hefty position squaring from the heavyweight Oil & Gas and high beta Realty counters thwarted the upside chances for the key indices. The encouraging weekly food inflation numbers too propped up sentiments in the session as food inflation plunged to the negative terrain to -3.36% for the week ended Dec 24 after hovering in the double digits for nearly two long years. The sharp decline in food inflation is seen as a major trigger for the RBI to look at the option of easing interest rates sooner than later. However, the key indices capitulated by the end tracking the European counterparts amid worries that the Euro-zone governments and banks will struggle to raise funds as France prepares for bonds Auction. While stock markets in Asia ended on a mixed note, failing to give any direction to the local markets. Back home, RBI's deputy governor Subir Gokarn opined that interest rates in India have peaked and inflation momentum is slowing, which is bringing concerns about growth back to centre stage.
Earlier on Dalal Street, the benchmark got off to a positive start, in tandem with the cautiously optimistic sentiments prevailing in Asian markets. The frontline indices soon gathered momentum and touched intraday highs in early hours but trade remained range bound thereafter. But fresh bouts of selling pressure surfaced after weak European opening, post which the indices slipped into the negative territory and found it hard to rebound. Eventually, the NSE's 50-share broadly followed index - Nifty settled at an absolutely flat note with trivial gains of less than half a point to close at sub 4,750 levels while Bombay Stock Exchange's Sensitive Index - Sensex shed twenty five points and closed below the psychological 15,900 mark. Moreover, the broader markets failed to show resilience in the session and pared all the gains to settle on a quiet note, performing in tandem with the larger peers. On the BSE sectoral space, the Auto index remained the top gainer in the space with over a percent gains followed by the Capital Goods and rate sensitive Banking indices which ended with notable gains. On the other hand, the Oil & Gas index plummeted over one and half a percent followed by the high beta Realty counter that too settled with similar losses. The markets slipped on weaker volumes of over Rs 0.80 lakh core while the turnover for NSE F&O segment also remained on the lower side as compared to that on Wednesday at over 0.7 lakh crore. The market breadth remained positive as there were 1433 shares on the gaining side against 1236 shares on the losing side while 156 shares remained unchanged.
Finally, the BSE Sensex lost 25.56 points or 0.16% to settle at 15,857.08, while the S&P CNX Nifty rose by 0.30 points or 0.01% to close at 4,749.95.
The BSE Sensex touched a high and a low of 15,980.17 and 15,809.31 respectively. The BSE Mid cap index was down by 0.01% and Small cap index up by 0.21%.
The major gainers on the Sensex were Jaiprakash Associates up 2.77%, Bajaj Auto up 2.70%, Hero MotoCorp up 2.33%, Tata Power up 2.02% and M&M up 1.83%. While, DLF down 4.06%, Reliance down 2.34%, NTPC down 2.03%, Coal India down 1.75% and Maruti Suzuki down 1.66%, were the major losers on the index.
On the BSE sectoral space, Auto up 1.21%, Capital Goods (CG) up 0.95%, Bankex up 0.46% and Consumer Durables (CD) up 0.03% were the top gainers while Oil & Gas down 1.68%, Realty down 1.65%, Metal down 0.74%, TECk down 0.45% and IT down 0.42% were top losers on the BSE sectoral space.
Meanwhile, India's weekly food inflation, measured by the Wholesale Price Index (WPI), extended the declining streak for the eighth week in a row and even plunged in to the negative terrain to -3.36% for the week ended December 24 from 0.42% for the previous week thanks to sharp decline in the prices of onions, potatoes and vegetables. The food inflation has turned negative after hovering in the double digits for nearly two long years.
The sharp slump in the rate of price rise of food items in the last one and half months has come as a sigh of relief for economic policymakers and also the government who had been battling to control the rampant inflationary pressure on the economy since two years. In a bid to rein inflation, RBI hiked key policy rates by 13 times since March 2010 only to pause the liquidity tightening measures in its recent meeting. The Union Finance Minister Pranab Mukherjee opined that this is the first time in almost six years, for which data with base year 2004-05 is available, that food inflation has shown a decline on an annual basis. The decline in food inflation is seen as a major incentive for the RBI to look at the option of easing interest rates sooner than later.
According to the data released by the Ministry of Commerce and Industry, the index for 'Food Articles' group declined by 0.2% to 190.0 from 190.3 for the previous week due to lower prices of jowar, fruits & vegetables, gram and moong (1% each).  However, the prices of poultry chicken (3%), egg, ragi and maize (2% each) moved up.
The index for 'Non-Food Articles' group rose by 0.6% to 178.7 (Provisional) from 177.6 for the previous week due to higher prices of soyabean (6%), raw jute (4%),  gaur seed and gingelly seed (3% each), cotton seed and raw cotton (2% each) and coir fibre, groundnut seed and mesta (1% each).  However, the prices of flowers (7%) and castor seed, fodder and copra (2% each) declined.
As a result, the index for 'Primary Articles', which accounts for 20.12% of the WPI, rose by 0.1% for the week ended December 24 to 197.6 from 197.5 for the previous week. The annual rate of inflation, calculated on point to point basis, stood at 0.10% for the period under consideration as compared to 2.70% for the previous week. Meanwhile, the index for Fuel & Power group which carries a weightage remained unchanged at its previous closing levels of 172.7 in the week.
The S&P CNX Nifty touched a high and low of 4,779.80 and 4,730.15, respectively.
The top gainers on the Nifty were Cairn up 4.27%, PNB up 3.74%, Bajaj Auto up 3.06%, IDFC up 3.02% and Axis Bank up 2.86%.
On the flip side, DLF down 4.12%, GAIL down 3.28%, BPCL down 2.69%, Reliance down 2.60% and NTPC down 2.09% were the top losers on the index.

The European markets were trading in red. France's CAC 40 lost 1.28%, Britain's FTSE 100 was down by 0.68% and Germany's DAX declined by 0.75%.

After a decent opening in morning session following a slew of encouraging US economic reports, most of the Asian peers ended the day's trade in the red on Thursday as concerns over Europe's debt crisis returned to the forefront. Chinese shares reversed early gains to close lower for a second-straight session on Thursday, the lowest level since March 2009 as worries about the property sector and tight liquidity conditions hit investor sentiment. Chinese developers broadly declined after property major China Vanke reported Wednesday a 30% on-year tumble in December sales. China Vanke shares dropped 1.1% and Oceanwide Real Estate Group lost 1.5% in Shenzhen.
Moreover, Japanese benchmark Nikkei declined by 0.83 percent as investors turned more cautious after Wednesday's rally amid more fears over the European debt situation, though energy producers helped lifting Hong Kong stocks on rising crude-oil prices.