Markets trade choppy; hit fresh intraday lows

The local equity markets are trading in the negative territory and have hit their fresh low in the trade today at this point of time. Though a firm stand of Asian Markets boosted the investor's sentiments back home in early trade today but the disappointing index of industrial production (IIP) data at 2.7% against a robust 10.3% in the previous month led the markets to come on its knees again. In the BSE sectoral space, Consumer Durables, Information Technology, Technology and Auto managed to find some buyers. On the flip side, Capital Goods, Healthcare and Public Sector Undertakings were the significant laggards. Banking stocks again fell in trade today indicating that previous session's gains were more of short covering rather than any fundamental shift. Index heavyweight RIL is reeling under pressure and is trading with losses of more than half a percent. The broader markets were also mirroring their larger counterparts and were trading in the negative zone with BSE mid-cap and small-cap indices declining by 0.29% and 0.35%, respectively. The market breadth on the BSE is negative; the losers thrashed the gainers in a ratio of 1636:1052 while 120 shares remained unchanged.

The BSE Sensex lost 118.70 points or 0.62% at 19,077.64. The index touched a high and a low of 19,379.55 and 19,048.56, respectively.

The BSE Mid-cap and Small-cap indices shed 0.29% and 0.35%, respectively.

The top losers on the BSE sectoral indices were Capital Goods (CG) down 1.68%, Healthcare (HC) down 1.45%, Public Sector Undertakings (PSU) down 1.15%, Realty down 1.07% and Oil & Gas down 0.96%.

On the flip side, Consumer Durables (CD) up 0.47%, Information Technology (IT) up 0.47%, TECk up 0.27% and Auto up 0.21% were the only gainers in the BSE sectoral indices.

Meanwhile, even as the government struggles to get consensus on Goods and Services Tax (GST), the India Inc wants it to cut down the current level of indirect taxes in order to support greater business growth and lower the inflation level. The finance ministry, already facing a fiscal deficit of 5.5% of gross domestic product (GDP), however is unlikely to accept the demand.

Industry lobbies in a pre-budget meet with the finance minister Pranab Mukherjee have demanded a 1% reduction in Central Sales Tax (CST) from the current 2%. The industry also wants a reduction in corporate tax from the current 30% to 25%, in consonance with the global average. Finally, the industry would like to see a rationalisation of the Minimum Alternate Tax (MAT) that companies have to pay when their tax liability is very low due to various exemptions.

Rajan Bharti Mittal, vice-president and managing director of Bharti Enterprises, and president of industry body FICCI, has asked the finance minister that in case it was not possible to cut down the taxes, the industry should at least be exempted from surcharge and education cess and the cascading impact of Dividend Distribution Tax should be corrected.

The Confederation of Indian Industry (CII) on the other hand emphasised the need to introduce a common market for agricultural produce across states and the opening up of foreign direct investment (FDI) in the multi-brand retail space. Both the moves it says would help improve efficiency of distribution, particularly in food commodities space, and help bring down food inflation. It also wants the FDI ceiling in defence sector to be hiked.

The top gainers on the Sensex were Tata Motors up 3.42%, Sterlite Inds up 2.41%, TCS up 2.04%, ICICI Bank up 0.71% and Bharti Airtel up 0.53%.

RCom down 2.87%, L&T down 2.82%, Bajaj Auto down 2.51%, Cipla down 2.48% and Tata Steel down 2.48%, were the top losers on the index.

India's industrial production slumped sharply in the month of November, raising concerns on the near term growth outlook of economy. The index of industrial production (IIP) expanded at a miserable pace of 2.7% against a robust 10.3% in the previous month. While markets were expecting some slowdown, the actual number was way below consensus expectation of around 6-6.5% expansion.

The downside came from a sharp slowdown in the manufacturing sector even as other constituents managed reasonable expansion. Manufacturing sector grew at just 2.5% against 12.3% in the previous month. Electricity production however showed improved performance at 4.8% against 1.6%. Mining also did reasonably well at 6%, though slower than year-ago figure of 10.7%.

Looking at the use based classification, the slowdown was most visible in the consumer goods space. Growth in the consumer durable goods, like electronics and autos, which has been the mainstay of IIP in recent months, came down to meager 4.3%  from over 36% growth seen in Nov 2009. The non-durable consumer goods showed even worse performance with a contraction of nearly 6% against growth of little over 2% in same month last year. Capital goods on the other hand continued to do very well with a growth of 12.8% against 11% a year ago.

Economists however are pointing out that the slowdown in November IIP numbers might not be a very good indication of growth momentum in the economy. This is because the IIP numbers have been so volatile in recent months, that even the RBI has had difficulty in gauging underlying growth momentum from it. There is a possibility of revision in figures at a later stage. Also, the year-on-year growth figure also came on a very strong base.

The key question here is how the RBI will read the figure and will it impact the decision on January 25, when the next monetary policy review is due. The answer is that while the very poor number does raise some concerns on growth side, greater probability is that the central bank may not factor it much into its decision. There are a couple of reasons for this. First, given that the RBI itself had raised doubts on credibility of out of date index, it is likely to take some other data like the purchasing manager index (PMI), which had shown improvement in November, into account as well.

The S&P CNX Nifty slid 36.85 points or 0.64% to 5717.25. The index touched a high and a low of 5815.75 and 5711.30, respectively. 

The top gainers on the Nifty were Tata Motors up 3.58%, Suzlon Energy up 3.47%, Sterlite Inds up 2.98%, Cairn India up 2.42% and TCS up 2.13%.

The top losers on the index were RCom down 2.72%, Bajaj Auto down 2.57%, L&T down 2.55%, Sun Pharma down 2.46% and Dr Reddy down 2.45%.

Other Asian markets with an exception of Straits Times, which is down by 0.02%, are trading in the green at this point of time. Shanghai Composite gained 0.56%, Hang Seng surged 0.96%, Jakarta Composite rose 1.81%, KLSE Composite increased 0.06%, Nikkei 225 jumped 0.02%, Seoul Composite soared 0.32% and Taiwan Weighted added 0.38%.

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