The Indian stock markets pared most of its early morning gains to end on a flat note fuelled by spike in inflation for August.

The Nifty closed at 5,840.55, down by 10.05 points or 0.17 per cent today. The Sensex finished at 19,742.47, up by 9.71 points or 0.05 per cent as compared to Friday’s close.

Earlier in the day, the Nifty had opened with a gap up of 79 points while the Sensex opened up by 244 points, before inflation data kicked in. Driven by a spurt in food prices, India’s wholesale price index rose by 6.1 per cent as against 5.79 per cent in July, the Commerce Ministry said today.

“The positive global cues aided strong gap up opening in domestic bourses on Monday. But, it could not hold for long and ended slightly in the red as the latest data of WPI inflation showed acceleration which triggered concern that the central bank might keep the policy rate unchanged…,” said Jayant Manglik, President-Retail Distribution, Religare Securities.

Among sectoral indices, Bankex (up 1.86 per cent), FMCG (up 0.38 per cent) and Auto (up 0.38 per cent) led the pack on the BSE, while Healthcare (down 2.47 per cent), Realty (down 1.96 per cent) and Information Technology (down 1.85 per cent) were the main laggards.

On Nifty, BPCL, IndusInd Bank and Maruti Suzuki were the top gainers while Ranbaxy, BHEL and HCL Technologies were the main losers.

On the global front, decreasing chances of US action on Syria resulted in falling crude prices and with this Asian markets rallied sharply.

Added to this, was an expectation that the US Fed would not taper its bond buying programme as fast as it had indicated and this could prompt a rate cut in India.

Credit Suisse in its India Market Strategy said: “The earnings season will have surprises: mispriced import and export hedges or complex currency derivatives are likely to get exposed. We now have more evidence (from RBI's September bulletin) that the recent precipitous fall in the rupee was caused only by a crisis of confidence and estimate ~US$13 bn exited in just July and August through panicking corporates hedging themselves.Given that the fear trade drove the decline, it is quite likely that the following appreciation may be as sharp. Even if the RBI tries to reduce volatility and starts to build reserves at the rupee dollar exchange rate of 60, currency volatility is already the highest ever seen, it added.”

Investors are closely watching the minutes of the US Federal Reserve meeting scheduled for Wednesday and Thursday. The Federal Open Market Committee meeting is important, especially for emerging markets such as India, because it would provide some definitive clue on the timing and downsizing of the Fed’s bond-purchase programme — commonly known as quantitative easing programme.

(This article was published on September 16, 2013)
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