Market trade in the red; Infy result disappoints

The Indian equity markets have made a weak start and are trading in the red as investors remain cautious ahead of weekly food inflation data and on speculation that the Reserve Bank of India will announce some measures to curb inflation at its monetary and credit policy review meeting on Jan-25. On the global front, the US markets went for a rally overnight as the debt worries from Europe eased after a successful bond auction by Portugal, while all the Asian equity indices were trading in the positive terrain at this point of time. Back home some selling pressure started building up after a below expected results from IT bellwether Infosys Technology, which announced its Q3 numbers just before the markets opening. Infosys was trading with a cut of more than three percent as its result failed to meet the market expectations, though it guided a better EPS but the undertone was cautious for the IT sector and hence the whole IT pack was trading lower. Capital goods, auto and public sector undertaking were the top gainers in trade; on the other hand software, technology and banking were the major losers on the BSE sectoral space. The broader markets were outperforming the benchmarks. Meanwhile, Telecom companies viz Idea Cellular, Bharti Airtel, Reliance Communication, MTNL all were trading higher after TRAI announced that the country added a whopping 52.21 million mobile users during the quarter ended September 30, 2010. The market breadth on the BSE was positive; there were 1034 shares on the gaining side against 700 shares on the losing side while 65 shares remained unchanged.

The BSE Sensex opened at 19,492.30; about 42 points lower compared to its previous closing of 19,534.10, and has touched a high and a low of 19,511.27 and 19,375.71 respectively. The index is currently trading at 19,396.77, down by 137.33 points or 0.70%. There were 16 stocks advancing against 13 declines while one stock remained unchanged on the index.

The overall market breadth has made a positive start with 57.48% stocks advancing against 38.91% declines. The broader indices were outperforming benchmarks; the BSE Mid cap and Small cap indices were up by 0.16% and 0.33% respectively.

The top gaining sectoral indices on the BSE were, GG up by 0.46%, Auto up by 0.11% and PSU was marginally up by 0.01%. While, IT down by 2.34%, TECk down by 1.76%, Bankex down by 0.77%, HC down by 0.53% and CD down by 0.43%, were the major losers on the index.

The top gainers on the Sensex were RCom up by 1.74%, Jaiprakash Associates up by 1.45%, Tata Motors up by 1.41%, L&T up by 1.09% and Reliance Infra was up by 1.04%.

Infosys down by 3.91%, Jindal Steel down by 1.27%, Hero Honda down by 1.12%, HDFC Bank down by 1.09% and SBI down by 1.08% were the top losers on the index.

Meanwhile, India's Planning Commission said on Wednesday that growth in the index of industrial production (IIP) over the current financial year was likely to be around 10%. Earlier, data released by ministry of statistics showed that industrial growth in November 2010 slowed down sharply to 2.7% compared with 10.3% in the previous month.

Given the fact that cumulative growth in the IIP over the April-November period has come down to 9.5% after the latest reported data, achieving an average of 10% over the fiscal would require over 10% expansion during rest of the months in current fiscal (Dec-Mar). This however looks very difficult given that the manufacturing has shown some slowdown in recent months and also base effect will be rising.

In fact, most economists agree that over rest of the current fiscal, IIP growth will continue to be around 4-7% range. This is because the index was growing at extremely strong pace over the same months of the previous fiscal. This will automatically make the year-on-year growth look smaller. For instance, growth in IIP in December was close to 18%. Such a high growth means that even if production is reasonably strong in Dec this year, growth in comparison to Dec last year will be rather small. Even a 5% growth in Dec 2010 would require strong industrial expansion on sequential basis.

Independent research organizations have already lowered their estimates of IIP growth for the fiscal. Most researchers now expect 2010-11 average IIP to show a growth of 8-9% from last year's level. This figure can be achieved even if the IIP grows at a more reasonable pace of say around 5-7% over next four months. While growth in December is expected to be lower owing to base effect, analysts expect things to improve somewhat in January and February.

The S&P CNX Nifty opened at 5,850.75; about 13 points lower compared to its previous closing of 5,863.25, and has touched a high and a low of 5,857.35 and 5,831.10 respectively. The index is currently trading at 5,831.95, down by 31.30 points or 0.53%. There were 24 stocks advancing against 26 declines on the index.

The top gainers of the Nifty were Ambuja Cement up by 2.22%, ACC up by 2.00%, JP Associates up by 1.81%, RCom up by 1.77% and Tata Motors up by 1.46%.

The top losers of the index were Infosys down by 3.98%, Dr Reddy down by 1.72%, Jindal Steel down by 1.61%, SBI down by 1.28% and Hero Honda was down by 1.22%.

All the Asian equity indices were trading in the green; Shanghai Composite was up 0.18 points or 0.01% to 2,821.48, Hang Seng was up 115.52 points or 0.48% to 24,241.13, Jakarta Composite was up 47.53 points or 1.34% to 3,602.30, KLSE Composite was up 3.17 points or 0.20% to 1,569.66, Nikkei 225 was up 57.45 points or 0.55% to 10,570.25, Straits Times was up 8.43 points or 0.26% to 3,253.37, Seoul Composite was up 4.02 points or 0.19% to 2,098.97 and Taiwan Weighted was up by 15.34 points or 0.17% to 8,980.34.

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