Inflation rises; Sensex, Nifty shed all their gains

iifl16th September, 2013 : Comments by Amar Ambani, Head of Research, India Infoline

After a strong start, the Indian equity market ended in the red erasing all its early gains after the WPI inflation rose at the fastest pace for six months in August, driven by an 18% jump in food prices. The inflation surged to 6.1% in August against 5.79% in July.

Markets had opened with a gap up following overnight gains in the US and the Asian markets after Lawrence Summers withdrew from consideration as Federal Reserve chairman, paving the way for Janet Yellen, which would favor a slower reduction of stimulus. However the early upswing was very short lived amid rising inflation.

The pharma, realty, IT and the telecom stocks were among the major laggards. Even the mid-cap and the small-cap stocks were under pressure while, the banking, FMCG and Auto stocks bucked the negative trend.

HCL Infosystems rallied 9% after reports stated that HCL Infosystems may merge system integration & services business with HCL Technologies.

Amar Ambani, Head of research at IIFL said, “The overall weakness in IT largely pertains to the swift appreciation of the INR versus USD in last 8-9 trading sessions. More specifically, the sharp down-tick in HCL Tech could also be attributed to the talks around its merger with HCL Infosystems. We remain bullish on HCL Tech, which should continue to be one of the top performers amongst peer-set in current fiscal too”.

The NSE Nifty erased almost 160 points while the BSE Sensex wiped out ~ 490 points from day’s high.

Finally, BSE Sensex closed at 19,742 up 9 points, while NSE Nifty closed at 5,840 down 10 points over the previous close.

Ranbaxy, BHEL, HCL Tech, Ultratech Cement, Sesa Goa, Lupin, TCS, Grasim, Tata Power and JP Associates were among the top laggards in the Nifty. BPCL, IndusInd Bank, Maruti, ICICI Bank, Bharti Airtel and Axis Bank were among the major gainers.

The advance-decline ratio marginally favoured the bears. On the BSE, 1243 stocks declined against 1119 advancing stocks, while 123 remained unchanged.

The INDIA VIX was up at 2% at 28.82. It hit a day’s high of 29.67 and low of 25.90.

Ranbaxy Laboratories stock plunged 30% on reports that USFDA has issued an import alert for drugs manufactured at its plant in Mohali.

Larsen & Toubro said its construction wing received new orders worth Rs17.93bn across various business segments in the last two and a half months. Shares of L&T ended lower by 1% to close at Rs829.