Markets extend losses; Realty stocks slide

The Indian equity markets have extended losses to hit fresh intraday lows in late morning session as India's February IIP recorded a growth of 3.6% as against the revised IIP of 3.9% for January.  India's IIP growth in Februray is below the markets estimates and disappointed the local trades and intuitional investors. Brent crude futures remain at elevated levels around $126 a barrel on concerns about long-term supply disruptions. Most of the Asian markets were trading in the red while US index futures were trading in green. Back home, In the BSE sectoral indices Realty stocks continued to suffer due to profit booking. Auto, Oil & Gas, PSU, Banking, Capital Goods and Metal stocks were also under pressure after below estimated IIP data. The broader markets continued trade in negative; the BSE Mid cap index and Small cap index shed 0.39% and 0.34% respectively. The overall market breadth on BSE continued in the favour  of declines which outnumbered advances in the ratio of 1472:1075, while,80 shares remained unchanged.

The BSE Sensex declined by 112.95 points or 0.58% at 19,338.50 .The index has touched a high of 19,426.30 and a low of 19,900.98.

The BSE Mid cap index and Small cap index shed 0.39% and 0.34% respectively. 

The top losers on the BSE sectoral indices were, Realty down by 2.13%, Auto down by 1.55%, Oil and Gas down by 1.47% PSU down by 0.68% and Bankex down 0.53% while FMCG up by 0.67%, IT 0.24% and TECk up by 0.20%  were the only gainers on the index.

The top gainers on the Sensex were ITC Up by 1.44%, Tata Power up by 0.75%, Bharti Airtel up by 0.68%, BHEL up by 0.60% and Infosys was up by 0.58%.

On the flip side Jindal Steel down by 2.82%, ONGC down by 2.63%, DLF down 2.51%, HDFC Bank down 2.45% and M&M down 2.30% were the top losers on the index.

Industrial production in India continues to remain week as the high base effect from last year and rising interest rates weighs on growth. According to the data released by the central statistical office (CSO) growth in the index of industrial production (IIP) came down to 3.6% in February 2010 compared with 3.9% (revised) in the previous month. There was a slowdown across the board if one looks at year-on-year comparisons. Manufacturing sector which has the highest weight in IIP expanded by just 3.5% compared with 16.1% growth seen in the same month a year ago. Mining was another poor performer expanding at just 0.6% as against 11% growth a year ago. Electricity was the only sector that performed well with growth of 6.7% compared with 7.3% growth in February 2010.

Looking at the use based classification it becomes clear that capital goods have been a major drag on performance. Overall capital goods production contracted by whopping 18.4% compared with huge expansion of 46.7% seen in the year-ago period. This was the biggest drag on growth in industrial production even as other sector performed somewhat better.

Consumer durables, which were responsible for early part of the IIP rally last year, expanded at 23.4% against 29.1% in the year-ago period. Consumer non-durables on the other hand saw significantly better growth of 6.1% as against contraction of 0.8% seen in the same month of previous year. Intermediate goods also showed some slowdown with a growth of 8.4% against 15.9% expansion seen last year. Production of basic good grew by 5.9% versus 8.5% in Feb 2010. Clearly, even as most segments have slowed down, it is the sharp contraction in the capital goods production which has pulled down growth in overall IIP.

The decline in capital goods production also point out that rising interest rates in the economy as the Reserve Bank of India (RBI) continues to hike its policy rates to check an increasingly sticky looking inflation might be beginning to impact investment plans of India Inc. The central bank has hiked its policy rates by eight times in last financial year and as inflation still remains at elevated levels the RBI is expected to continue its tightening deep into 2011 as well. This may well impact industrial production going forward too.

However, some economists also point out that the IIP has been too volatile in recent past and therefore it may not be reflecting in a very precise manner the underlying momentum in the Indian industrial space. In fact, even the RBI had earlier pointed out that given the antique nature of the index (base: 1993-94), it was difficult to gauge momentum of the industrial sector from the IIP numbers. Nonetheless, to the extent IIP indicates latent movement in industrial space, the latest data does suggest a slowdown compared with what was the case at this time around last year. 

The S&P CNX trimmed 35.90 points or 0.60% at 5,806.10. The index has touched a high of 5,830.30 and a low of 5,795.35.

The top gainers of the Nifty were Sun Pharma up by 1.75%, ITC up by 1.58%, Bharti Airtel  up by 0.86%, Grasim up 0.70% and Infosys up 0.70%.

Siemens down by 3.84%, ONGC down by 2.59%, Jindal Steel down 2.58%, DLF down 2.49% and  HDFC Bank down 2.45% were the major losers on the index.

The Asian markets were trading mixed; Shanghai Composite increased 0.45 Jakarta Composite climbed 0.38% .On the flip side, Hang Seng slipped 0.45%, KLSE Composite shed0.59%, Nikkei 225 lost 0.52%, Straits Times declined 0.50%, Seoul Composite trimmed 0.35% and  Taiwan Weighted tumbled  0.16% .

Unit-8, 3rd Floor, First Mall, The Mall, Ludhiana-141001, Punjab (INDIA).

To unsubscribe or change subscriber options visit: http://www.aweber.com/z/r/?TJzsLEwstCyc7OysHMyctEa0nKxsnEycLA==