Two central banks keep shares on tenterhooks

Indian markets remained choppy in a narrow range for the better part of the day as two central banks on either sides of the pacific kept equity markets on tenterhooks here.

After both retail and wholesale inflation numbers for the month of November along with industrial activity figures for October, announced recently,  blew the 'green shoots of economic recovery' theory into smithereens, investors are now on the edge of their seats to see whether US Federeal Reserve decides to scale back its bond-buying program earlier than scheduled.

The 30-share Sensex ended 56 points lower at at 20660 levels and the 50-share Nifty scrapped 14 points at 6155 levels.

Market participants said expectations of a rise in interest rates by the Reserve Bank of India and US Federal Reserve's comments on its stimulus programme are likely to keep the market nervous in the week ahead.

Foreign investors have pressed the panic button in the run up to Fed meeting have turned net sellers of Indian shares on Friday.

Foreign institutional investors sold shares worth a net Rs 432.02 crore on Friday, 13 December 2013, as per provisional data from the stock exchanges.  

The Fed will hold its two-day Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday, followed by a press conference by Fed Chairman Ben Bernanke.

But a bigger behemoth back home that threatens to beat the bulls back into their corrals is the RBI's mid quarter monetary policy review on December 18. Market is most likely to ignore a 25bps rate hike which is largely expected after november inflation figures dissapointed but a steeper rise could be hazardous in the short-term.

The Wholesale Price Index (WPI), a measure of inflation at wholesaler's level, rose to 7.52% in November from 7% a month ago mainly due to continued rise in vegetable prices. This takes the wholesale price inflation to a 14 month high. Markets were expecting inflation to be around 7%.

The prices of vegetables went up by 95.25% in November against a price rise by 78.38% in the previous month, marked by a rise in the prices of potato this time.

Consumer price index (CPI) for the month of November too rose 11.24% in November 2013 as compared to 10.17% (final) in October 2013.

Markets recovered from their day's lows after hitting a trough post wholesale inflation data for November came in at a 14-month high.