Sensex ekes out slim gains on inflation relief

The Indian equity market coped quite well with Standard & Poor's mass sovereign downgrades in Europe as inflation fell to a two-year low in December, giving elbow room to the RBI to adjust its monetary policy and support economic growth. Trade Secretary said today that India's exports surged by ~26% during April-December 2011 and could hit US$300bn for the full fiscal year.

It was a cautious start to the week for the Indian stocks, as the benchmark indices ended almost unchanged. The equity benchmarks managed to recover smartly from session lows. Earlier, they had got stuck in a tight trading range due to weakness across the Asian markets.



The indices ended near day's high amid select buying in the index heavyweights like L&T, SBI, Maruti, BHEL, Tata Motors and Infosys. The NSE Nifty ended above 4850 while the BSE Sensex closed near the 16200 mark.

Finally, the Sensex ended at 16,189, up 34 points from the last close. It earlier touched a day's high of 16,257 after opening at a day's low of 16,049. The Nifty settled at 4,874, up 8 points. It hit a day’s high of 4,880 and days low of 4,827.

Among the 30 constituents of the Sensex, L&T, SBI, Maruti, BHEL, Tata Motors and Infosys were among the major leaders. On the other hand, Reliance Industries, NTPC, HDFC Bank and Hindustan Unilever ended in the negative terrain.

Among the BSE sectoral indices, the BSE Capital Goods index was the top gainer, up 2%. The BSE IT index gained 1.8%, while the BSE Teck index was up 1.5%. The Auto and FMCG indexes rose 0.7% or more.

The BSE Oil & gas index lost 1.7% and BSE Pharma index fell 0.6%.

The Small-Cap index rose 0.3% while the Mid-Cap index remained unchanged.

Meanwhile, the India VIX on the NSE was up by 2.5%. The index closed at 24.07 after being as low as 23.22. It had opened at 23.48.

Market breath was marginally in the positive zone. On the BSE, 1388 stocks advanced while to 1354 shares declined; only 105 stocks remained unchanged.

"The inflation data for December was along expected lines, resulting in no major movement in the stocks. But, the yield on the benchmark 10-year Government paper reversed course to rise on the day slightly as the Government revised October's inflation higher. Also, there may not be any immediate cuts in interest rates from the RBI when it meets in January 24. Whether the CRR will be reduced or no is anybody's guess. Upcoming corporate results, events in the overseas markets, the RBI policy and F&O expiry will keep the market players on tenterhooks in the weeks to come. One would also have to contend with fresh political upheavals once elections kick off across five states. Uttar Pradesh is the crucial battleground. In March, investors would tend to focus on the Union Budget," says Amar Ambani, Head of Research, IIFL

Inflation, as measured by the wholesale price index (WPI), was at 7.47% in December as against 9.11% in November, the Union Commerce & Industry Minister said today.

The annual inflation rate was at 9.45% during the corresponding month of the previous year.

The Government revised the inflation rate for October to 9.87% from a provisional estimate of 9.73% while the WPI stood at 157.0 as compared to 156.2 earlier.

On the other hand, the yield on the benchmark 10-year Government bond erased the day's fall, as the December inflation reading met the broad market expectations.

The Indian Rupee was at 51.51 per dollar after being as low as 51.80.

In Asian markets, China's Shanghai Composite fell 1.6% to end at 2,209.87; the Nikkei Stock Average in Japan ended 1.4% lower at 8,378.36; Australia S&P/ASX 200 closed down 1.2% at 4,147.20.

The Hang Seng in Hong Kong was down ~1% at 19,012 while the Kospi in Seoul was down ~0.9% at 1,859.

The Straits Times index in Singapore was down ~1.3% at 2,756. The Taiex in Taiwan was down 1% at 7,103. The NZX index in New Zealand lost 0.5% at 3,210.