PESSISMISTIC

Stock markets in India have plunged over a percent from the high point of the day as the frontline equity indices, which traded with around half a percent gains in mid morning trades, are trading with about half a percent cut in early noon trades. The bargain hunting that was evident for most part of the morning session faded away immediately after commerce ministry released India's widely tracked WPI inflation numbers which accelerated to 7.23% for the month of April, worse than consensus estimates of 6.7%. Investors resorted to largely across the board risk aversion in late morning trades as they were expecting that a moderation in inflation reading would give some leeway to the RBI to further employ liquidity easing measures at a time when the industrial activity is in doldrums. However, with the rise in WPI index, the Indian Reserve Bank remains in a tight spot as it finds itself trapped between curbing inflation and trying to shore up economic growth. The interest rate sensitive Baking and Real Estate counters on the BSE suffered the maximum brunt of selling pressure after the disappoint inflation print came to the fore and plummeted over a percent each. Meanwhile, global cues too were dissuading investors from opening fresh positions as most Asian markets drifted lower despite encouraging reports from China where the People's Bank of China in order to spur growth in world's second largest economy announced cut in bank reserve ratio, the amount of cash banks must set aside as reserves. Moreover, the European markets got off to a somber opening with large cuts of around one and half a percent as talks to form a new government failed in Greece, intensifying fears that the debt laden nation would exit from the single currency union. On the domestic front, sentiments also were dampened by the disappointing cues from money market where anemic rupee depreciated against the US dollar despite the Reserve Bank's recent efforts to check outflow of forex. Apart from the rate sensitive counters, investors were also seen squaring off positions from the Oil & Gas and Power pockets which sank over half a percent each. However, some buying in defensive counters like Healthcare and FMCG helped the benchmarks in capping the losses.

Moreover, the broader markets traded on a pessimistic note with cuts of around half a percent in early afternoon trades largely in line with their larger peers. The bourses slumped on good volumes of over Rs 0.7 lakh crore while the market breadth on BSE was in favor of declines in the ratio of 1398:974 while 120 scrips remained unchanged.

The BSE Sensex is currently trading at 16,217.79 down by 75.19 points or 0.46% after trading as high as 16,390.33 and as low as 16,200.31. There were 13 stocks advancing against 17 declines on the index.

The broader indices were trading on a pessimistic note; the BSE Mid cap index slipped 0.82% and Small cap index declined 0.49%.

On the BSE sectoral space, Healthcare up 0.30%, Consumer Durables up 0.12% and FMCG up 0.08% were the only gainers, while Bankex down 1.57%, Realty down 1.07%, PSU down 0.90%, Power down 0.74% and Oil & Gas down 0.68% were the major laggards in the space.

M&M up 1.50%, Bajaj Auto up 1.46%, GAIL India up 1.24%, Maruti up 0.80% and Hero Moto up 0.47% were the major gainers on the Sensex, while ONGC down 2.36%, HDFC Bank down 2.08%, DLF down 1.63%, BHEL down 1.45% and SBI down 1.40% were the major losers in the index.

Meanwhile, the annual rate of inflation, based on index numbers of wholesale prices (WPI) in India, unexpectedly accelerated in the month of April as it came in at 7.23% as compared to 6.89% for the previous month and 9.74% during the corresponding month of the previous year. Build up inflation in the financial year so far was 2.07% compared to a build up of 1.74% in the corresponding period of the previous year.

The index for primary articles group, which has a weightage of 20.12% in overall WPI, rose by 4.7 percent to 215.9 from 206.3 for the previous month. The index for fuel and power group with a weightage of 14.91% in WPI rose by 1.8% to 177.1 from 174.0 for the previous month. The index of Manufactured Products group (weight 64.97% of WPI) rose by 1.0% to 143.6 from 142.2 for the previous month.

India's wholesale price index has taken everyone by surprise as it quickened in the month of April amid consensus expectations of a moderation in the rate of price rise to 6.7%. In the backdrop of sharp contraction in industrial production and rise in WPI inflation, the Indian Reserve Bank remains in a tight spot as it finds itself trapped between curbing inflation and trying to shore up economic growth.

The S&P CNX Nifty is currently trading at 4,902.30, lower by 26.60 points or 0.54% after trading as high as 4,957.20 and as low as 4,894.45. There were 16 stocks advancing against 34 declines on the index.

The top gainers on the Nifty were M&M up 1.40%, Bajaj Auto up 1.31%, Ranbaxy up 1.20%, GAIL up 1.13% and BPCL up 0.96%.

JP Associates down 3.50%, Bank of Baroda down 2.69%, SAIL down 2.41%, HCL Tech down 2.33% and ONGC down 2.11% were the major losers on the index.

In the Asian space, Shanghai Composite declined 0.32%, Hang Seng dropped 0.65%, Jakarta Composite slipped 0.58%, KLSE Composite eased 0.12%, KOSPI Composite inched down 0.18% and Taiwan Weighted fell 0.33%.

On the other hand, Nikkei 225 gained 0.23% and Straits Times Index rose 0.14%.

The European markets got off to a negative start as France's CAC 40 sank 1.74%, Germany's DAX declined 1.25% and United Kingdom's FTSE plunged 1.23%.