India Markets Wednesday Wrap-Up: Stock Markets Close On A Firm Footing

by: Equitymaster

Indian stock markets traded in the positive for a larger part of the day today. The indices began the day's proceedings on a positive note, and while subsequent sessions saw the indices pare some gains, they recovered in the later hours. The final trading hour saw the indices close well above the dotted line. While the BSE-Sensex closed higher by around 106 points (up 1%), the NSE-Nifty closed higher by around 34 points (up 1%). The BSE Mid cap closed marginally higher, while the BSE Small cap closed marginally lower. With respect to sectoral indices, gains were largely seen in banking and auto stocks.

As regards global markets, Asian indices closed mixed today while European indices have opened in the green. The rupee was trading at Rs 49.94 to the dollar at the time of writing.

Cement stocks closed mixed today. While ACC and Mangalam Cement found favour, India Cements and Ambuja Cement closed into the red. As per a leading business daily, cement prices are likely to increase by Rs 8 to Rs 10 a 50-kg bag in light of the hike in railway freight rates. The surge in demand for the commodity has also fueled the need to raise prices. Not just that, cement makers may also face cost pressure with the likely mark-up in petrol and diesel prices plus a possible coal price hike of 10-12% by Coal India. It must be noted that players such as ACC are likely to see production cost increase as the company is largely dependent on the railway network for movement of the commodity.

Inflation, as measured by the Wholesale Price Index (WPI), rose to 6.5% in February after declining for the past 5 months. The rise has been attributed to sharp increase in food prices especially vegetables and protein based items. Food inflation was 6.07% in February against -0.52% in January. Inflation in the manufactured items was above 5%. Despite this rise, the Finance Minister expects inflation to come down to 6.5% by the end of this fiscal year. The Reserve Bank of India (RBI) in the meanwhile has paused its rate hiking spree and also announced a reduction in cash reserve ratio (CRR) last week. Indeed, this CRR cut, and the previous one in January has clearly signaled that the central bank is worried about growth in the system. While policy rates have not yet been eased, the CRR cut may just set the tone for FY13.