Markets continue to trade lower; metal and realty counters drag

The local equity markets continue to trade lower in late morning session on the back of below market expected India's industrial production (IIP) number, that tanked to 1.6% in the month of December, even lower than last month's weak performance of 2.7% though a lot of base effect is involved in the figure but it has weighed on the sentiments. Most of the Asian markets are also trading weak while US Dow Futures were down 54 points in the screen trade, keeping the sentiments negative for local markets. The BSE Sensex and NSE Nifty both were trading below their psychological levels around 17,300 and 5,200 levels. In BSE sectoral space Metal, Realty, TECk, IT and Oil and Gas counters once again were trading lower and dragging the market down but some buying in the Banking, Consumer Durables (CD) and Health Care companies are trying to give support to the market .While the broader indices were trading in positive terrain; the BSE Mid cap and Small cap indices were up by 0.12% and 0.35% respectively. The market breadth on the BSE was slightly positive; the gainers thrashed the losers in a ratio of 1269:1212 while 91 shares remained unchanged.

The BSE Sensex declined 84.30 points or 0.48% to 17,378.74. The index touched a high of 17,526.64 and a low of 17,370.82 respectively.

The BSE Mid cap and Small cap indices were up by 0.12% and 0.35% respectively.

In BSE sectoral space, Bankex up 0.38%, Consumer Durables (CD) up 0.11% and Health Care up 0.08% were the only gainers in the BSE sectoral space.

On the other hand, Metal down 1.80%, Realty down by 1.67%, TECk down 1.43%, IT down 1.30% and Oil and Gas down 0.97% were the major losers on the index.

The top losers on the BSE were, Reliance Communication down 4.71%, Hindalco Industries down 3.84%, Tata Steel down 3.34%, TCS down 2.84% and Bharti Airtel down 2.38%. 

NTPC up 1.64%, HDFC up 1.57%, Sterlite Industries up 1.57%, ICICI Bank up 1.18% and Tata Motors up 0.83% were the top gainers on the index.

India's industrial production slowed down sharply in the month of December to touch 1.6%, even lower than the 2.7% seen in the previous month. While a lot of base effect is involved in the figure, as there was a very sharp jump in IIP in the same month of last year, the figure still is somewhat below the market expectations, particularly after the infrastructure industries had registered over 6% growth for the month under review.

The sharp downside was mainly because of the slowdown in manufacturing activity that slumped to just 1% growth compared with over 19% growth seen in the year-ago period. The electricity production grew by 6% in Dec 2010 against 5.4% in the same month a year ago. Mining sector on the other hand slowed down to 3.8% from a high base of 11.1% growth seen in the year-ago period.

Looking at the used based classification, growth in the consumer durables, which have been a major contributor to the IIP rally in early 2010, slowed down to 18.5% compared with 41% seen in the year ago period. Consumer non-durables on the other hand contracted by 1.1% compared with a growth of 3% seen in the same month last year. Basic goods registered reasonable growth at 5.2% against 8.4% in the year-ago period. Intermediate goods recorded 6.6% expansion against 23.5% in Dec 2009.

The cumulative growth in industrial production over the April-December period of current fiscal stood at 8.6%, unchanged compared with the growth seen in the same period of last year. The only difference is cumulative growth was on rising trajectory in last fiscal and is on a downhill journey this fiscal. The only consolation perhaps is that the industrial growth for the last month has been increased to 3.6% against 2.7% a year ago.

While the slowdown looks very sharp in the year-on-year numbers, the same is unlikely to be the case with month-on-month basis. Since there was a record high jump in the IIP in December last year, it is quite natural that the year-on-year growth would look tepid even if the industrial production improves significantly on a sequential or a month-on-month basis.

Economists feel that the seasonally adjusted figures would show significantly better growth on sequential basis. Also, the 1993-94 based index itself is out of touch with the currently realities and probably has not been able to reflect the actual industry momentum with a lot of accuracy over the recent period. Given these factors, it would be reasonable not to read too much in the IIP, particularly in the year-on-year numbers, and rather stress on reasonable month-on-month growth and good performance seen in other indicators like the purchasing managers' index.   

The S&P CNX Nifty trimmed 20.50 points or 0.39% to 5205.30.The index touched a high of 5,248.10 and a low of 5,197.45 respectively.

The top gainers of the Nifty were IDFC up 4.88%, Cairn up 4.27%,Sterlite Industries up 2.05% HDFC up 2.01% and NTPC up 1.94% .

The top losers of the index were RCom down 4.61%, BPCL down by 4.30%, Suzlon down 3.94%,Tata Steel down 3.84%, and  Sesa Goa down 3.77%.

All the Asian markets baring Shanghai composite were trading in the red Hang Seng was trimmed 0.28%, Jakarta Composite declined by 0.57%, KLSE Composite tumbled 0.44%, Straits Times shed 0.91% and Seoul Composite decreased by 1.31% while Shanghai composite surged 0.23%.

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