Deflationary phase?

Data released by the Finance Ministry on the contribution of broad commodity groups to the year-on-year inflation during the latest week show that primary articles contributed 227 per cent to inflation, a quadrupling of its share from 56 per cent in the previous week.

In manufactured products, the contribution to inflation was 166 per cent in the week under reference, from 90 per cent in the previous week. The fuels group, on the other hand, showed a negative contribution at (-) 289 per cent against (-) 46 per cent the previous week, registering a six-fold drop.

Even as analysts predict that inflation is likely to turn negative starting April and could remain so until the end of 2009, the Government, on its part, allayed fears that the economy could be entering a deflationary phase. “I do not see any sign of deflation right now. Probably, the decline in inflation is more due to higher base last year than any significant drop in prices,” the Cabinet Secretary, Mr K.M. Chandrasekhar, told presspersons on the sidelines of an event here.

The International Monetary Fund, earlier this week, said that India should rely more on monetary policy to support the economy as high public debt makes fiscal efforts difficult. The RBI had, on March 4, cut its key repo rate to an all-time low of 5 per cent, having pruned it by 400 basis points since October.

Source: Business Line

Inflation plummets to 0.44%

The annual Wholesale Price Index-based inflation inched closer to zero in the first week of March, setting the stage for the Reserve Bank of India to cut interest rates further to prop up growth.

Despite the decline in the headline inflation estimate to a three-decade low of 0.44 per cent, food products inflation continues to rule high and hurt at the consumer-level. The latest Consumer Price Index for Industrial Workers, to be released on Friday, is expected to be around 10.4 per cent.

According to data released by the Ministry of Commerce and Industry here on Thursday, the annual WPI inflation rose 0.44 per cent for the week ended March 7, sharply lower than the previous week’s annual rise of 2.43 per cent. Inflation was recorded at 7.78 per cent a year ago and the sharp dip in the latest reported week has been partially attributed to the base effect coming into play.

The drop of 199 basis points in the latest WPI inflation estimate is the steepest since the week ended November 1, 2008. There is no record of inflation dipping this low since 1977-78, according to Government estimates.

The sharp fall in headline inflation during the latest reported week was on account of an across-the-board dip in inflation levels. In primary articles, the year-on-year inflation dipped to 4.4 per cent for the latest reported week, against 5.8 per cent the previous week. In food articles, inflation fell to 7.4 per cent after being stable at 8.3 per cent in the previous two weeks. Cereals, pulses, salt, milk and sugar, however, clocked high relatively year-on-year inflation rates.

In the fuel and power group, inflation dipped further to clock minus 6 per cent versus minus 5.1 per cent in the earlier week. In manufactured products, inflation rate decreased to 1.3 per cent in the current week, from 4 per cent last week. Inflation in most sub-groups declined or remained steady relative to rates recorded in the previous week.

Markets see biggest single-day gain in 2009 led by financials

Today's session was the strongest session for the benchmark indices in the year 2009. The markets continued their northward journey on the back of strong global cues. Short covering in rate sensitive and fresh long build up in major heavyweights boosted the markets higher.

The Nifty closed above the 2700 mark, after seven sessions while the Sensex ended above 8700 level, after eight sessions. Banking & financial, technology, metal, oil & gas and capital goods stocks led this rally followed by auto, realty and FMCG stocks.

The 30-share Sensex touched an intraday high of 8,793.21, before closing the day at 8,756.61, up 412.86 points or 4.95%. The 50-share NSE Nifty gained 101.80 points or 3.89%, to settle at 2,719.25, after hitting a high of 2726.15.

In an interview to CNBC-TV18, KV Kamath, Managing Director and Chief Executive Officer of ICICI Bank, said he sees recovery in the fourth quarter of the current financial year across sectors except in the textile industry. Kamath, also the president of industry body Confederation of Indian Industries (CII), said he was basing his assumption on the interaction with members of the CII National Council meeting.

Reliance Industries, Infosys, ICICI Bank, HDFC, L&T, HDFC Bank, SBI, ONGC, TCS, Tata Power, Bharti Airtel and Reliance Communication were leading contributors in this rally. However, only NTPC closed in red, was down 2%.

The Nifty March Futures ended with 1-point premium and added nearly 40 lakh shares in open interest (OI) with a turnover of close to Rs 9,900 crore. The Nifty Put-Call ratio was up to 1.35 from 1.25. Among stocks futures, DLF added about 46 lakh shares, SAIL added about 30 lakh, ICICI Bank added nearly 22 lakh and Reliance Capital added about 11.5 lakh shares in open interest.

This rally was mainly led by positive global cues. At the time of closing of Indian equities, European markets were trading higher. FTSE went up 62 points, to 3,774. CAC was trading at 2,744, up 50 points and DAX was trading at 3,999, up 43 points.

The US futures were trading with marginal gain; Dow Jones Futures were at 7,195, up 27 points and Nasdaq Futures at 1.166, up 3 points.

Asian markets ended higher; Nikkei 225 Average surged 5.15% and Straits Times was up 5.62%. Taiwan Weighted shot up 3% and Hang Seng gained 4.37%. However, Shanghai and Seoul Composite were up just 0.2% each.

Market outlook: Experts suggest caution till 2700 Nifty breaks

It was a lukewarm rally on Dalal Street as the stellar rally on Wall Street failed to lift traders' spirits. Mixed cues from the economy too didn't help. Inflation for the week-ended February 28 came in at 2.43% versus 3.03% week-on-week (WoW). This is the lowest inflation number since June 2002. The January Index of Industrial Production (IIP) number came in at -0.5% versus -0.6% in December 2008.



Markets closed in the green on the back of strong showing by autos and banks. Nifty closed at 2,617 up 44 points, while the Sensex shut shop at 8,343 up 183 points.

Amit Dalal, Amit Nalin Securities expects the Nifty to trade volatile till the 2,500 to 2,700 range is not broken. However, he was quick to add that it is not expected this week. Technical Analyst Ashwani Gujral feels there will be positive news once the Nifty crosses this zone and advises caution till then.

Experts outlook on markets

Amit Dalal, Amit Nalin Securities is of the view that a bear market rally has started in the US but sees a positive trend going on from here. “The markets have seen a huge sell-off in the last couple of months. They have covered a lot of ground and there is perhaps a case to be made out that fundamentals are improving. We have some kind of global positive scenario in the US markets. If that pans out in the next 15 days, then you might get a closing for this month higher than the F&O closing which you got last month.”



According to Dalal, emerging markets are not something that is looked at with the same way the US market is looked at. Therefore, there will not be same FII following. “One should look at what is the downside, why should the market go down another 500 points unless you see rampant selling taking place and right now I don’t see that many factors telling me the market should be 500 points lower than where we are right now.”



Dalal believes that markets are very volatile. The 2,500 to 2,700 range is still not broken, is bearing upon trader’s patience and will continue to do so until something substantially different happens which is not expected this week.

Ashwani Gujral, Technical Analyst sees the current market rally extending to 2,680 or 2,700. According to him, 2,700 to about 2,800 now is a huge congestion zone and once Nifty crosses this zone there will be positive news. He firmly believes that because of the elections markets may underperform even if there is a global rally. People need to be cautious till markets are below 2700, he added.

Source : Moneycontrol

Sensex hits 3-year low as negative sentiment rules

The benchmark index Sensex fell almost 3 per cent and closed at 8,197, a three-year low, while the broader 50-stock Nifty was down 2.59 per cent, closing at 2,576.

Even the seven-year low inflation rate of 3.03 per cent for the week ended February 21 failed to boost the market sentiment, said analysts.

Reasons for the fall

• Weak Global Equity market
• Continuous FIIs pullout
• Widening Fiscal ficit at 6% of GDP
• Fears of sovereign downgrade by S&P and Moody's

Measures that didn't help

• All the three stimulus packages
• Even the recent sop to export sector
• The US stimulus package
• Rate cuts by central banks across the world.

General elections spending could provide stimulus to economy

The General Election related expenditure could impart a much-needed spending stimulus of about Rs 15,000-16,000 crore to the economy.

The 2009-10 Budget has allocated Rs 9,700 crore for it. To this must be added the spending per constituency by parties and candidates. If there are two serious candidates, the average spending could be as high as Rs 5 crore to Rs 12 crore per constituency per candidate, say political parties. Each candidate is allowed to spend only Rs 35 lakh but there is no limit on how much his or her friends, and the party, can spend.

Thus, at an average, the spending per constituency can be as much as Rs 14 crore. With 544 constituencies, the spending by candidates comes to another Rs 7,086 crore. Added to what the Government will spend, the total spending could exceed Rs 15,000 crore.

The money is spent on aircraft, vehicles, fuel, posters, tents, audio equipment, food and paying the daily expenses for the core workers.

Past data show that the bulk of this expenditure takes place in the month immediately preceding the election. In 1999, when the election was held in October, the sale of utility vehicles in September came to 9,788 units, up from 8,098 units in August. In 2004, the election was in May and SUV sales in the month came to 12,224 units compared with 12,366 units in April. However, there had been sharp increase in the previous two months, possibly on account of advance purchases by taxi operators ahead of the election. This time round, with the drop in call-centre demand for taxis, operators are unlikely to augment their fleets, say automakers.

Diesel sales in September 1999 went up by 9.6 per cent. In May 2002, diesel sales went up 26 per cent.

The trend in aircraft induction is less clearly discernible. “In the last four-to-five years the general aviation fleet in India, which includes non-scheduled, private and Government, has almost doubled to about 600 aircraft," the Chief Executive Officer, CAPA, Mr Kapil Kaul, said.

The two main political parties - the Congress and the Bhartiya Janata Party - spent Rs 8.71 crore and Rs 76.46 lakhs respectively on air travel during the last general elections, according to data on the Election Commission website.

Industry sources point out that the expenditure shown is miniscule as more often than not the aircraft is chartered by a third person who also makes the payment, thereby easing the financials on the books of the political parties.

But with election charters being ad hoc charters, the rates are 25-30 per cent more than the Rs 25 lakh monthly and Rs 25,000 to Rs 30,000 an hour charged by most PSUs having helicopters.

(Source: Business Line)