Inflation spooks market

Data showing a surge in inflation to a three-year high spooked the market today. Banking stocks fell after concerns of possible Reserve Bank of India intervention to rein in inflation. Capital goods and power stocks declined. Bharat Heavy Electricals (Bhel) and HDFC were major losers whereas Ranbaxy Laboratories and Tata Steel were top gainers from the Sensex pack. The market breadth was weak. European markets which opened after Indian market, were in green.

The 30-share BSE Sensex provisionally ended down 483.92 points or 3.06% at 15,348.63. At the day’s low of 15,303.04 Sensex lost 529.51 points in late trade. At the day’s high of 15,896.09, the Sensex rose 63.54 points in early trade.

The broader based S&P CNX Nifty was down 116.6 points or 2.44% at 4,655.

BSE Clocked a turnover of Rs 4947 crore compared to a turnover of Rs 4985.58 crore on 3 April 2008.

India's wholesale price index (WPI) rose 7% in the 12 months to 22 March 2008, accelerating from the previous week's rise of 6.68%. The rate is the highest since 4 December 2004. Prospects of further monetary tightening by the Reserve Bank of India (RBI) following a surge in inflation is a cause for concern at a time when the already high rates are pinching the domestic industry. The surge in inflation has triggered fears that RBI my raise cash reserve ratio (CRR). An increase in CRR would suck out liquidity immediately pushing up the cost of funds and thereby curbing demand.

The market breadth was weak: on BSE 835 shares advanced as compared to 1793 that declined. 67 shares remained unchanged.

The BSE Mid-Cap index down 1.8% to Rs 6,272.36 and BSE Small-Cap index down 1.5% to 7,722.48.

India’s largest private sector company in terms of market capitalisation and oil refiner Reliance Industries was down 2.96% to Rs 2,323.

Capital goods stocks fell. Bharat Heavy Electricals (down 6.92% to Rs 1,633.50) and Larsen & Toubro (down 5.55% to Rs 2,692) edged lower. Suzlon Energy rose 1.58% to Rs 276.40.

Banking stocks plunged after inflation data. HDFC Bank (down 2.74% to Rs 1,290.05), ICICI Bank (down 3.17% to Rs 762.90) and State Bank of India (down 1.96% to Rs 1,607) edged lower.

Power stocks declined. Tata Power Company (down 2.85% to Rs 1,126.30), Reliance Energy (down 2.14% to Rs 1,164), NTPC (down 2.11% to Rs 190.15) and Reliance Power (down 2.43% to Rs 321.60) edged lower.

IT stocks declined. Wipro (down 4.5% to Rs 415.60), Infosys (down 2.55% to Rs 1,482.90), Tata Consultancy Services (down 1.78% to Rs 870.15) and Satyam Computer Services (down 0.65% to Rs 425.25) edged lower.

HDFC (down 6.67% to Rs 2,280), Mahindra & Mahindra (down 6% to Rs 605.15), Bharti Airtel (down 4.53% to Rs 783.85), ITC (down 3.46% to Rs 200.80), Jaiprakash Associates (down 5.21% to Rs 221.25) and Tata Motors (down 2.5% to Rs 613.45) edged lower from Sensex pack.

Ranbaxy Laboratories (up 2.55% to Rs 458.5), Tata Steel (up 0.17% to Rs 660.70) were only gainers from Sensex pack.

ACC shed 0.16% to Rs 835 even as the company said its cement shipments rose 4.9% to 1.92 million tonnes in March 2008 over March 2007.

European markets were in green. France’s CAC, Germany’s DAX and UK’s FTSE 100 rose in between 0.12% to 0.4%.

Japan’s Nikkei edged 0.72% lower in cautious trade today, 4 April 2008, ahead of US jobs data later in the session that will provide fresh clues on the world's largest economy. Stock markets in China, Taiwan and Hong Kong were closed today for the Tomb Sweeping Day holiday.

US stocks edged up on Thursday, after a report that Merrill Lynch & Co does not need to raise more capital eased fears of a deeper credit crisis and offset concern that monthly jobs data would point to a recession. The Dow Jones Industrial Average gained 20.20 points or 0.16% at 12,626.03. The tech-laden Nasdaq Composite index rose 1.90 points or 0.08% to 2,363.30.

Meanwhile, the Bombay Stock Exchange (BSE) today launches the trading of Sensex-based futures on the US Futures Exchange (USFE) in Chicago. The contract will have a notional value of $40,000 and a tick value of $10. The clearing and settlement will take place through The Clearing Corporation, Chicago.

Stock-specific activity may rule the roost on the bourses in the near term depending on the guidance given by company managements for FY 2009 (year ending March 2009) at the time of announcing Q4 March 2008 results. IT bellwether Infosys Technologies kickstarts the earnings reporting season on 15 April 2008.