11% Inflation shock; lowest close for mkts since Aug 07

Inflation in double digit has bruised the markets very badly; the Sensex lost over 500 points. Blood-thirsty bears marched harshly on bulls and remained active through the day. The Sensex and Nifty hit new 2008 lows; it was lowest closing for both indices since August 2007. Indices of rate sensitive sectors like Bankex, Realty and Auto also touched new 2008 low. Advance:Decline ratio was pathetic. All BSE indices battered severely. Experts say that RBI will have to use monetary tools to contain inflation.

Inflation Internals
Fuel, power, lubricants	7.80%
ATF prices	14%
Diesel	21%
LPG	20%
Naptha	17%
Furnace Oil	15%
Food articles	-1.10%
Non-food articles	1.40%
Manufactured pdts	0.30%
Edible Oil Major Gainer
Sunflower oil	6%
Groundnut	3%
Soybean/vanaspati	2%
Mustard seed	4%

Wholesale Price Index for the week ended June 7 stood at 11.05% as against 8.75% in earlier week. This is way above markets' estimation, which was expected around 9.93%. It is at 13-year high; last time inflation touched a high of 11-11% in May 1995. Inflation for April revised to 7.95% versus 7.33% earlier.

Oil price hike, which declared on June 4, 2008, was the main reason behind this higher inflation. Commerce Secretary says that they see high inflation for next 2 months and will consider food grain, vegetable price control to contain inflation.

Finance Minister says, "Rise in inflation was expected and we will have to look at stronger steps on fiscal, monetary side. Hike in petrol price is unavoidable."

Analysts feel that fuel price hike has not fully reflected in inflation numbers. It will see more impact in the next few weeks. They expect that the RBI will hike CRR or Repo rate before Monetary Policy. It will affect growth in infrastructure sectors as capital availability become scare, squeeze banks margin and impact on auto sales.

Moody's says, "RBI looks set to further tighten Monetary Policy and not to wait until next formal review. Inflation and tightening monetary policy will weigh on investor sentiment."

Broader indices have shattered completely and hit new 2008 lows again in just 10 days after June 10. The Sensex and Nifty hit new 2008 lows of 14,519.27 and 4333.60, which broken earlier lows of 14645.3 and 4369.8. Volumes were very high today; total turnover traded by the markets stood at Rs 85088.58 crore. This includes Rs 21056.2 crore from NSE Cash segment, Rs 58533.66 crore from NSE F&O and the balance Rs 5498.72 crore from BSE Cash segment.

The Sensex crashed nearly 569 points and the Nifty 171 points while touching day's low. The Sensex closed at 14,571.29, down 516.70 points or 3.42% and the Nifty at 4347.55, down 156.7 points or 3.48%. All BSE and NSE indices closed in red. ONGC is the only stock, remained strong through the day.

Amongst frontliners, Zee Entertainment was down -8.45%, Reliance Communication -6.68%, Reliance Ind -6.63%, Hindalco -6.39% and Jaiprakash Associates -6.03% while ONGC was up 1.56%.

Market breadth was weak; about 514 shares have advanced while 2328 shares declined. Nearly 284 shares remained unchanged.

Realty Index was the worst hit and hit new 2008 low. Index fell by 250.79 points or 4.45% at 5,383.81 due to huge selling in HDIL, Akruti City, Sobha Developers, Parsvnath, Indiabulls Real, DLF, Omaxe and Unitech.

Metal stocks like NALCO, Hindalco, Tata Steel, Sesa Goa, Jindal Steel, SAIL and Sterlite Ind lost shine. Index was down 603.80 points or 3.99% at 14,528.06.

Bankex lost 208.40 or 2.97% to settle at 6,804.78. Major losers were Bank of India, Bank of Baroda, IOB, SBI, Union Bank, Kotak Mahindra, ICICI Bank and HDFC Bank. Deutsche Bank says, "We see another 1/2 quarter of double-digit inflation and more RBI tightening."

Oil & Gas stocks took huge beating; Index fell 5.03% or 498.96 points at 9,419.89 as selling pressure seen in RNRL, Essar Oil, Reliance Ind, Cairn, GAIL and BPCL. Reliance Industries has hit new 2008 low and closed down by 6.63% at 2,099.20.

FMCG Index went down 2.51% at 2,234.23 on the back of weakness in GSK Consumer, United Breweries, Colgate, HUL, ITC, Marico and Dabur India.

Power stocks like Torrent Power, Reliance Infra, Reliance Power, Power Grid Corp, Tata Power, NTPC, CESC and Suzlon Energy have lost ground. Index plunged 2.5% at 2,539.84.

Auto stocks like TVS Motor, Bharat Forge, Hero Honda, Ashok Leyland, Tata Motors, Maruti Suzuki and Punj Tractors lost the road. Index was down 101.27 points or 2.44% at 4,042.86. Ashok Leyland says that such high inflation may result in incresae in interst rates; CRR hike will affect the CV industry and overall industry.

IT Index also caught into bears' grip, lost 101.28 points or 2.35% at 4,204.62. Major losers were Satyam, Patni Computer, Tech Mahindra, Wipro, TCS, HCL Tech and Infosys. S Gopalakrishnan of Infosys says that higher inflation will increase the cost of doing business.

Capital Goods stocks also hammered a lot. This includes Gammon India, Praj Industries, Siemens, Rel Ind Infra, Crompton Greaves, Punj Lloyd, BEML, Bharat Elec, ABB, L&T and BHEL. Index fell 267.90 points or 2.3% at 11,399.79. Lanco Infratech says that Inflation concerns are in the direction of interest rates and rising rates will be a concern for the infrastructure sector as a whole. They see hardening of interest rates by 50 bps from now.

Pharma stocks like Piramal Healthcare, Sun Pharma Adv, Aurobindo Pharma, Matrix Labs, Biocon, Dr Reddy's Labs, Wockhardt, Cipla and Ranbaxy Labs lost ground. Index fell 101.52 points or 2.29% at 4,325.40.

Midcap Index slipped 3.17% or 197.74 points at 6,032.43. Amongst midcap stocks, UB Holdings, Gammon India, Rajesh Exports, Corporation Bank, National Fert, BGR Energy, IFCI, Akruti City, Piramal Healthcare, Walchandnagar, Torrent Pharma, Deccan Aviation and Usha Martin were down over 7%.

In the small cap segment, Sical Logistics, OCL India, ETC Networks, Rain Commodities, Suprajit Eng, Hind Nat Glass, English Ind Cla, Arrow Webtex, Tata Metaliks, Automotive Axle, Zenotech Labs, Gayatri Project and Panchmahal Stee crashed over 9%. Small Cap index fell 262.76 points or 3.43% at 7,397.66.

Most active counters on the bourses were Reliance Industries, L&T, Reliance Comm, Ranbaxy Labs, ICICI Bank and HDFC.

On weekly basis, the markets smashed out cruelly. Sensex plunged 4% and the Nifty 3.7%; respective indices slipped nearly 1200 points and 325 points from weekly highs. BSE Capital Goods, Oil & Gas, Realty and Metal Indices were down 5%. Reliance Industries lost -7.5%, Bharti Airtel -6%, Reliance Communication -9.5%, TCS -5% and DLF -4.5%.

On the global front, Asian markets ended mixed; Nikkei was down -1.33%, Taiwan Weighted -1.8%, Hang Seng -0.23% and Kospi -0.56% while Shanghai was up 3.01% and Straits Times 0.31%. European markets were trading flat, at the time of writing market report.

Markets Snapshot

• Sensex, Nifty hits new 2008-lows as inflation accelerates to 11.05% at 13-year high
• Lowest closing for Sensex, Nifty since August 2007
• Sensex ends down 516.7 pts at 14571.2; Nifty down 157 pts at 4347.5
• RIL hits new 2008 lows; closes down 6.6% at 2100
• CNX Midcap Index down 3.4%, BSE Small-cap Index down 3.4%
• All BSE Sectotal Indices end in the red
• BSE Oil & Gas Index down 5%; RIL down 6.6%, Cairn India down 5.6%
• BSE Realty Index down 4.5%; DLF down 4.3%, Unitech down 2.4%
• BSE Metal Index down 4%; Tata Steel down 4.8%, SAIL down 3.3%
• Index Losers; Zee Ent down 8.5%, R Comm down 6.6%, Hindalco down 6.4%, Nalco down 6.3%, Tata Comm down 6%
• Loser; Pyramid Saimira down 20%, SICAL Logistics down 16.6%, OCL India down 13.5%, Rain Comm down 10.6%
• Loser; IFCI down 8.2%, GHCL down 8.8%, Sasken Comm down 7.9%, Indiabulls Fin down 8.4%, HDIL down 9.3%
• NSE Advance Decline at 1:11
• Total market turnover at Rs 85088 cr Vs Rs 56589 cr on Thursday
• F&O turnover at Rs 58533 cr Vs Rs 42696 cr on Thursday

F&O Snapshot

• Nifty July futures end at 20 pts discount; June ends flat
• Nifty July futures add 30 lakh sharees in OI; add 43.7 lakh shares in June series
• Fresh shorts seen across realty, banking
• Unwinding seen in momentum stocks
• Nifty June 4500 Call adds 7.5 lakh shares ; 38% OI buildup
• Nifty June 4400 Call adds 5.8 lakh shares; 58% OI buildup
• Nifty June 4300 Call adds 5.65 lakh shares
• F&O Stocks
  RPL down 5%; add 38.5 lakh shares in July series
  Ispat down 5%; add 27.5 lakh shares in July series
  IFCI down 8%; add 20 lakh shares in July series
  TTML down 5.2%; add 18.8 lakh shares in July series
  RNRL down 6.6%; add 15.2 lakh shares in July series
  Parsvnath down 6.5%; add 12.8 lakh shares in July series
• Rollover
  Ultratech: 61%
  NDTV: 58%
  India Cememt: 55%
  HDFC Bank: 27%
  Sesa Goa: 26%
  NTPC: 25%
  DLF: 25%
  R Power: 20%

Markets This Week

• Sensex down 4%, Nifty down 3.7%
• Sensex down nearly 1200, Nifty down nearly 325 points from weekly highs
• CNX Midcap Index down 3.5%, BSE Small Cap Index down 2.5%
• BSE Cap Goods, Oil & Gas, Realty, Metal Indices down 5%
• BSE Bankex down 3.5%; SBI down 6.2%, ICICI Bank down 4.2%, HDFC Bank down 2%
• Index losers: RIL down 7.5%, Bharti down 6%, Rel Comm down 9.5%, TCS down 5%, DLF down 4.5%
• Non-Index losers: IFCI, Chambal Fert down 11%, RNRL down 7.5%, Nagarjuna Fert down 8.2%, RPL down 4.3%
• Non-Index losers: IDFC, GHCL down 10%, Mercator down 12.5%, Punj Lloyd down 9%
• Non-Index Gainers: Sasken Comm up 15%, Bajaj Hind up 5%, SRF up 8%