The markets closed in the red for thr first trading day of the week in sync with the Asian and European markets which too were in the red for the day. The inflation data which appears to be better than the previous month largely due to the base effects failed to make any impression on the market. At the close, the Sensex was down 194 points at 18,336 while the Nifty shed 47 points to end at 5,797.On the other hand, the broader markets were better off for the day. The smallcap and the midcap indices were down 0.7% as compared to the Sensex which lost 1%

Earlier in the day, tracking weak Asian peers the markets opened lower. The Sensex attempted to move north in the first hour of trade but a bout of weakness ahead of the inflation data saw the rate sensitive realty and banking stocks dragging the markets lower. However, due to the marginal decline in the inflation for the month of April as compared to March the markets recovered losses partially. This recovery turned to be short lived as the BSE benchmark index slipped lower to touch the day’s low of 18,333, down 173 points from the day’s high in the afternoon trades.

According to the inflation data, inflation for the month of April saw a marginal decline at 8.66% versus 9.04% reported in March. WPI primary articles inflation stood at 12.05% versus 12.95% month-on-month, while the WPI fuel group inflation came in at 13.32% versus 12.92% reported a month ago. Manufacturing product inflation saw a negligible decline to 6.18% versus 6.21% reported in March. However the prospect of rising energy costs will keep pressure on the Reserve Bank of India (RBI) to raise rates in June.

This softening may prove to be a blip as the government aims to raise state-controlled prices of fuels such as diesel and cooking gas, possibly as soon as this week. Earlier, state-run oil refiners had raised petrol prices by about 8.6%, or Rs 5 a litre ($0.11), from Sunday, a record hike that will fuel inflation in Asia’s third-largest economy.

Among the sectoral indices, the shares of rate-sensitive banking and real estate companies dipped more than 1% each on concerns of further interest rate hikes to control the rising inflation. Meanwhile, the state-owned oil marketing companies raised the prices of gasoline by 8.5% with effect from Sunday in New Delhi, the most since June 2008, prompting concerns of an acceleration in inflation. The draggers in the realty space were Anant Raj Industries down 5% followed by DLF, Sunteck Realty, Mahindra Lifespace and Unitech which lost 2% each. Among the metals, Jindal Saw down 4% followed by Tata Steel, Bhushan Steel, Jindal Steel, SAIL and Welcorp which shed 2% each.

Earlier this month, the Reserve Bank of India (RBI) in its annual credit policy meet raised the repo and reverse repo rates by 50 basis points each to 7.25% and 6.25% respectively. The central bank also increased the saving bank rates by 50 basis points to 4%, which would fetch higher returns for depositors in the wake of high inflation.

Amongst the Sensex losers were Jaiprakash Associates at Rs 85 down more than 3%, while Bajaj Auto at Rs 1,299 and DLF at Rs 226 shed 3% each. Mahindra & Mahindra and Tata Steel declined nearly 3% each, while ONGC, Reliance Infra and HDFC let off 2% each.

Only four of the Sensex components closed in the green today, with Hero Honda leading the gains at Rs 1,865 up almost 4% and BHEL at Rs 2,055 up 1%, and Bharti Airtel, at Rs 370, gained nearly 1%.

Of the 2,899 stocks traded on the BSE today, 1,059 advanced, while 1,695 declined, making the market breadth negative.

Source: Business Standard

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