Record Inflation; Sensex Up 1.4%

123jump.com Staff
16 Jun, 2008
New York City

Sensex index in India rose 1.4% after a week of volatile trading. Software exporters and bank stocks rose but stocks of vehicle manufacturing fell. The government increased excise duty on large cars and sport utility vehicles. Wholesale inflation in India at the end of May, but before the recent price increase in petrol rose to 8.75%. The inflation is now at seven-year high.

[R]1:00PM New York, 10:30PM Mumbai - Indian inflation raced to its highest in seven years at the end of May.[/R]

Indian markets rose on Monday lifted by firm global cues and crude oil traded at an elevated level.

Banking and software stocks rallied while auto stocks declined after the government increased excise duty on large cars, multi-utility vehicles and sports utility vehicles with an engine cubic capacity exceeding 1500.

Crude rebounded to $134.90 a barrel after falling in response to plans by Saudi Arabia to push output to its highest rate in decade.

At close of trades, the 30-share Sensex gained 1.4% or 206.20 at 15,395.82. On the National Stock Exchange the CNX Nifty 1.2% or 55.4 at 4572.50.

Of the BSE traded shares, 1,776 shares gained, 872 shares declined and 76 shares remained unchanged. Daily turnover on the BSE stood at 4,512 crore rupees and on the NSE at 10, 725 crore rupees.

Inflation at seven-year high

India inflation raced to its highest in seven years at the end of May and could top 10% this month as higher fuel prices feed in, stoking speculation of more central bank tightening after this week''s rate hike.

The Reserve Bank of India last Wednesday unexpectedly increased its key-lending rate by 25 basis points to 8% percent to contain inflation expectations, but left all other rates unchanged.

It was the first hike in the repo rate in more than a year, but with the impact of costlier petrol and diesel yet to be felt.

Wholesale price inflation, India''s most widely watched measure, rose 8.75% in the 12 months to May 31, well above expectations, data released last Friday showed. That was a substantial jump from the previous week''s annual rise of 8.24%.

The inflation rate is now at its highest since Feb. 10, 2001, when it was 8.8%. Continuing a trend of sharp upward revisions, inflation for the week ended April 5 was revised up to 7.71% from a provisional 7.14%.

On increasing minimum support price for paddy by 105 rupees per quintal to 850 rupees, he said.

BSE shuffles benchmark indexes

The benchmark index Sensex will add mining firm Sterlite Industries and Tata Power Company with effect from June 28 and Ambuja Cements and Cipla will be dropped from the index.

The index committee of the MSE in its meeting held last week decided to revise the composition of Sensex, BSE 100, BSE 200 and BSE 500 indexes.

The revision in the Sensex will be effective from July 28, while revisions in the BSE 100, BSE 200 and BSE 500 will become effective from June 23.

This would be Tata Power''s re-introduction into the most popular index of the BSE. Earlier, it was replaced by Anil Ambani-controlled Reliance Communications and last traded as a Sensex stock on June 9, 2006.

Gainers and losers

Atlas Copco, the local subsidiary of the Swedish engineering company surged daily limit of 20% after it said that the company may buyback stocks.

ICICI Bank gained 4.4% to 798.70 rupees. State Bank of India fell 0.6% to 1,326.40 rupees after the country''s largest lender, on Saturday decided not to raise its prime-lending rate.

Infosys Technologies rose 2.3% at 1,907.25 rupees and Satyam Computer climbed 1.6% at 488.45 rupees.

Hero Honda Motors fell 1.8% at 762.80 rupees and Mahindra & Mahindra declined 0.2% at 569.10 rupees.

Hindalco Industries fell 2.3% at 171.35 rupees after the company said on Friday it may consider a comprehensive plan including an equity rights issuance to finance the loan taken to acquire an aluminium rolling company Novelis.

Reliance Communication fell 1.5% at 535.10 rupees after Reliance Industries, India''s largest private sector firm by market capitalization and oil refiner, claimed first right of refusal to buy a controlling stake in it.

Reliance Communications, controlled by Anil Ambani, is in exclusive talks with South Africa''s MTN about a tie-up that could create a wireless telecom company with 120 million subscribers on three continents.

As part of a tie-up, Anil Ambani would likely swap his controlling stake in Reliance Communications to become the largest shareholder in MTN. Shares of Reliance Industries rose 0.7% at 2,284.85 rupees.

Sesa Goa, the largest iron exporters from India to Japan fell 2% on the worries that earnings may decline after the government imposed 15% export tax on the material exports.

Tata Steel gained 0.8% to 848.35 rupees and Steel Authority of India rose 1.5% to 162.25 rupees.