Andrew L Dcunha

Mumbai, Aug 25: BSE SENSEX  slipped  139 points to end at 16146  points and Nifty  closed  49 points lower at 4,840 points as higher inflation and concerns over the health of the global economy dampened investors' mood.  The markets drifted lower in the last leg of the trade due to futures and options expiry; selling pressure in IT and metal shares also weighed. After opening marginally firm, the Nifty witnessed a choppy session as traders’ rolled over positions from August to the September series. The Nifty touched a high of 4,915 during the opening trades and moved between gains and losses before giving into selling pressure in the last half an hour of the trade.   High inflation and tight liquidity were factored into the market valuations  Sensex was currently trading at 13.5x 1 year forward price to earnings multiple, which is lower than 10 year average of 15x..

Most Asian markets rallied Thursday on robust corporate results and optimism the Federal Reserve may take steps to stimulate the U.S. economy.    Japan’s Nikkei Stock Average   ended the day 1.5%  higher, China’s Shanghai Composite Index jumped 2.9%  and Hong Kong’s Hang advanced 1.5% . South Korea’s Kospi  rose 0.6% to 1,764.58 .

Gold tumbles

Gold extended its sharp decline, after a wave of profit-taking triggered the biggest daily drop in futures since 1980. Spot gold slipped to $1,732 an ounce, taking losses to some $180 since it hit a record high of $1,911.46 earlier in the week.

Gold prices have jumped $400 since July as worries about a global recession sent investors scrambling for the safe-haven asset. The intensity of the move prompted some analysts to call for gold investors to book profits. India gold shed about 8% from its Tuesday's record high to 25,985, due to continued profit-taking.

Rising food inflation

On the macroeconomic front, the food price index rose 9.80%, while the fuel price index climbed 13.13% in the year to August 13. Primary articles inflation came in at 12.40% . Finance Minister Pranab Mukherjee today expressed concern over rising food inflation, saying it is perilously near double digits.  "It is bad news that inflation has increased. Weekly inflation from August 6 to 13 has gone up... I am more concerned about food inflation, which is perilously near double digits, from 9.03 to 9.80%," said Finance Minister Pranab Mukherjee

 Andrew L D Cunha, Managing Director, WinWin Fin  Advisory Pvt. Ltd. Mangalore. Email:  finadvisoryltd@yahoo.com