Dismal IIP numbers drag benchmarks down; Nifty below 5,500 mark

Indian equity indices are trading weak on dismal IIP numbers as investors are having conservative approach, cautiously piling up the positions in Consumer Durables while selling was witnessed among FMCG, Oil & Gas and Bankex. The sentiments were dampen not only from IIP numbers front but dismal inflation numbers  released yesterday and fears looming over market that RBI would further its hawkish stance against the towering inflation and raise key policy rates for the tenth time helped market drag down. Besides, State Bank of India (SBI), the country's premier lender, scrapping the annual interest rate reset clause on all loans would be shifting to uniform base rate-linked payments in order to iron out the fluctuations in its profitability. The bank from now on plans to give term loans linked to its base rate, which would be the floor rate below which the bank will not lend to anyone. As the banks' profitability gets pinched whenever there is a movement in interest rates as borrowers are charged with a lag effect, while deposit rates rise immediately. Majority of Asian markets were trading in red barring Shanghai Composite, KLSE Composite and Nikkei while the European markets too were trading in red spilling pessimism in the local market. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,500 and 18,300 levels, respectively. The market breadth on the BSE was in favor of declines in the ratio of 1107:1637 while 124 scrips remained unchanged.

Moreover, the Cabinet Committee on Economic Affairs has raised the minimum support price (MSP) for the current year's paddy crop by Rs 80 a quintal. The hike is however, below the recommendation of Rs 160 by the Commission for Agricultural Costs and Prices (CACP), which was inclusive of a bonus of Rs 80 over and above the MSP. MSP is the price at which the government procures paddy from farmers and the Paddy MSP (common grade) was at Rs 1,000 a quintal last year. The new MSP would work out to Rs 1,080/quintal for common paddy and Rs 1,110/quintal in the case of fine ('Grade A') varieties grown mainly in Punjab and Haryana.

The BSE Sensex shed 179.25 points or 0.97% at 18,205.65. The index touched a high and a low of 18,399.02 and 18,182.90 respectively.

The BSE midcap index eased 0.49% and the smallcap index was down by 0.51% points.

On the BSE sectoral front, Consumer Durables up 0.03% remained the lone gainer. While, FMCG down 1.28%, Oil & Gas down 1.12%, Bankex down 1.05%, Realty down 1.04% and Metal down 0.99% were the major laggards in the BSE sectoral space. 

The top gainers on the Sensex were ONGC up 0.43%, TCS up 0.38% and Hindalco up 0.22%. On the flip side, Reliance Infra down 1.90%, ITC down 1.87%, Maruti Suzuki down 1.80%, RIL down 1.69% and Tata Steel down 1.59% were the major losers on the index.

Meanwhile, the newly introduced Index of Industrial Production (IIP) with an updated base of 2004-05 starting from the month of April, has expanded at 6.3% pace in April to 167.8 as compared to the level in the month of April 2010. The annual growth for the period April-March 2010-11 stands at 8.2% over the corresponding period of the previous year. However, under the old series, annual industrial output growth in April was 4.4%, lower than the general expectation of around 5%.

According to the data released by Central Statistics Office, the IIP for the Mining, Manufacturing and Electricity sectors for the month of April 2011 stands at 129.1, 178.0 and 146.0 respectively, with the corresponding growth rates of 2.2%, 6.9% and 6.4% as compared to April 2010.

As per Use-based classification, the growth rates in April 2011 over April 2010 are 7.3% in Basic goods, 14.5% in Capital goods and 3.4% in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of 3.8% and 2.1% respectively, with the overall growth in Consumer goods being 2.9%, the statement showed.

The S&P CNX Nifty receded 53.45 points or 0.97% at 5,467.60. The index touched high and low of 5,521.45 and 5,457.45 respectively.

The top gainers on the Nifty were Ranbaxy up 0.69%, ONGC up 0.36%, TCS up 0.27%, Hindalco  up 0.27% and Tata Power up 0.08%. On the other hand, Reliance Capital down 2.25%, SAIL down 1.91%, Reliance Infra down 1.81%, Sesa Goa down 1.81% and Ambuja Cement down 1.77% were the major losers on the index.

On the Asian front, Hang Seng wilted 0.84%, Jakarta Composite declined 0.49%, Strait Times slipped 0.51%, Seoul Composite plunged 1.19% and Taiwan Weighted plummeted 1.81%. On the other hand, Shanghai Composite rose 0.10%, KLSE Composite advanced 0.34%, Nikkei 225 surged 0.50%.

The European markets are trading in red with France's CAC 40 shed 0.15%, Germany's DAX slipped 0.16% and London's FTSE eased 0.19%.

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