Wobbly benchmarks depose over half percent as IIP blues stoke slowdown fears

Disturbing IIP numbers for the month of April gave bears a fresh opportunity to go on rampage and tranquilize the Indian stock markets which have already been going through the prolonged lull as bulls remained under covers amid growing uncertainties in the markets across the world. Finance Minister Pranab Mukherjee expressing his concerns over the patchy IIP data said it was 'disturbing' but added that trends will become apparent only when the new index is analyzed over a longer period. However, marketmen speculated that government may take a cue from the IIP numbers and expedite its policy initiatives and grant fast approval for pending infrastructure projects. Post the disappointing numbers and Mukherjee's statement, investors kept squaring off positions from the blue-chip stocks especially from the Capital Goods pocket. While all rate sensitive counters like realty, banking and automobile witnessed hefty bouts of profit booking amid expectations that the Reserve Bank of India (RBI) could hike interest rates by 25 basis points next Thursday. During the session, the frontline indices also infringed the crucial 5,500 and 18,300 support levels that they were holding on for a quite some time. Meanwhile, leads from the markets across the globe too remained subdued as Asian shares exhibited mixed trend while the European markets traded on a somber note. The spurt in international crude oil prices in the last two sessions of trade also pulverized domestic sentiments by augmenting rate hike fears.  The only positive for the local bourses was that foreign institutions did not turn away in the session however, retail investors remained completely on sideline amid the mounting macro-economic headwinds like towering inflation, rate hike fears, rising cost of borrowing and slowing economic growth.

The NSE's 50-share broadly followed index Nifty, sank by over half a percentage point and settled below the crucial 5,500 support level while Bombay Stock Exchange's Sensitive Index, Sensex took a hundred points cut and closed well below the psychological 18,300 mark. The broader markets which showed some resilience in the first half eventually succumbed to the selling pressure that was evident in the frontline indices. The midcap index ended with 0.34% losses while the smallcap index slipped by 0.46% point. On the sectoral front, it was the Capital Goods counter which languished at the bottom of the table with 1.08% laceration as the IIP data showed that capital goods growth was just 2.5% in April, 2011, compared to 64.1% in April last year. Profit booking was also witnessed in defensive FMCG sector as majors like ITC and United Spirits plunged by 1.69% and 1.02% respectively. While index heavyweights like RIL and ICICI Bank too failed to make their presence felt and slipped by over a percent each. On the other hand, Consumer Durables pocket remained the sole gainer in the BSE sectoral space as reports of normal monsoon boosted demand prospects for consumer goods. Consumer durable majors like Whirlpool and Titan zoomed by 3.7% and 1.8% respectively. Furthermore, after being badly butchered in the recent past, Maruti Suzuki stocks saw a ray of hope after Haryana Government banned worker's strike at its Manesar plant. Earlier, the country's largest car-maker Maruti Suzuki had stated that production at its Manesar facility continued to be completely stopped as the workers' strike at the plant entered its 7th day. The markets receded on higher volumes of over Rs 0.97 lakh crore while the turnover for NSE F&O segment also remained on the higher side compared to Thursday at over 0.85 lakh crore. Market breadth remained negative as there were 1197 shares on the gaining side against 1650 shares on the losing side while 126 shares remained unchanged.

Finally, the BSE Sensex lost 116.36 points or 0.63% to settle at 18,268.54 while the S&P CNX Nifty lost 35.25 points or 0.64% to settle at 5,485.80.

The BSE Sensex touched a high and a low of 18,399.02 and 18,182.90, respectively. The BSE Mid cap and Small cap index was down by 0.34% and 0.46% respectively. The only gainers on the Sensex were Maruti Suzuki up 1.03%, Hindalco Industries up 0.74%, ONGC up 0.64% and TCS up 0.37%.

On the flip side, DLF down 1.83%, ITC down 1.69%, L&T down 1.64%, Reliance Infrastructure down 1.52% and Tata Steel down 1.36% were the top losers on the index.

Meanwhile, Index of Industrial Production (IIP) in April 2011 rose by 6.3% from a year ago; on the other hand the growth was measured at mere 4.4% in comparison to 7.3% in the month of March as per the old series, while IIP in April 2010 stood at 16.7%. This time it was a new series of IIP data with an updated base of 2004-05 and with inclusion of more components, the total number of items under the series has gone up to 695 from 538 earlier. The old series had only 281 manufacturing items whereas in new series numbers of manufacturing items increased by 45%. The new series was long being asked to be implemented as the older series was showing a very high degree of volatility. The new series is likely to give more realistic picture of economy as it includes more items and capture the industrial production process more accurately, increasing its reliability. The new series takes into account the item basket as per the more recent production behavior, hence this series can be considered to be a much closer reflection of the present industrial scenario.   

As per the data released by the Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation, the IIP with new base year for the month of April 2011 increased by 6.3%, while the annual growth for the 2010-11 stood at 8.2% over the corresponding period of the last year. The IIP for manufacturing, mining and electricity sectors for month of April 2011 grew by 2.2%, 6.9% and 6.4%, respectively. The annual growth for these three sectors for 2010-11 were 5.2%, 8.9% 5.5% respectively. According to the old series the IIP for manufacturing, mining and electricity sectors for month of April 2011 was recorded at 2.1%, 4.4% and 6.4%, respectively.

For month of April 2011, 16 out of 22 industry groups in the manufacturing sector registered positive growth. This growth was because of  'Office, accounting & computing machinery' which registered highest growth of 96.5%, followed by Motor vehicle, trailers and semi-trailers (22.9%), Fabricated metal products, except machinery & equipment' (22.3%). In contrast, the industry group which registered negative growth were Furniture; manufacturing n.e.c. (-15.0%), Wood and products of wood & cork except furniture; articles of straw & plating materials' (-13.5%).

According to Use-based classification, the sectoral expansion rates in April 2011 over April 2010 was mainly because of the capital goods which registered the highest growth 14.5% in the month of April 2011 and followed by the Basic goods (7.3%), Consumer durables (3.8%), Intermediate goods (3.4%), Consumer goods (2.9%) and Consumer non-durables (2.1%). According to the old series, the Use-based classification growth for Month of April 2011 as compared to April 2010 were driven by Consumer durables (9.2%), and followed by Consumer goods (5.9%), Basic goods (5.3%), Consumer non-durables (4.5%), Intermediate goods (2.4%), and Capital goods (2.4%).

The IIP data shows a slowdown in manufacturing activity to 4.4% in April 2011 against 18% in April 2010, mainly due to higher borrowing cost, tighter credit-vigilance and increasing input cost. However, falling consumption demand shows the policy tightening is working, which is more or less required to control the inflation.

The only gainer on the BSE sectoral space was Consumer Durables (CD) up 0.47%.

The major losers in the BSE sectoral space were Consumer Durables (CD) down 1.08%, FMCG down 1.04%, Realty down 0.80%, Metal down 0.73% and PSU down 0.67%.

The S&P CNX Nifty touched high and low of 5,521.45 and 5,457.45, respectively.

The top gainers of the Nifty were Hindalco up 0.87%, Cairn up 0.64%, ONGC up 0.62%, Ranbaxy up 0.41% and TCS up 0.31%.

On the flip side, Grasim down 2.24%, DLF down 2.19%, Reliance Capital down 1.90%, L&T down 1.85% and Reliance Infrastructure down 1.69% were the major losers on the index.

European markets were trading in mix. France's CAC 40 slipped by 0.65%, Britain's FTSE 100 lower 0.09% and Germany's DAX was up by 0.10%.

Most of the Asian equity indices finished the day's trade in the negative terrain on the last trading day of the week. South Korea's bench mark declined over a percent in the trade after country's central bank raised interest rates for the third time this year on Friday, surprising financial markets, as the government warned of rising inflation risks even as growth in Asia's fourth-largest economy cools while, Taiwan stocks fell about two percent, with smartphone maker HTC Corp declined by the maximum allowed in a day after brokerage Goldman Sachs removed the company from its conviction list. However, Chinese shares pared all of its earlier losses and ended up 0.1 percent on Friday, aided by property shares, but low volume showed that investors were reluctant to make big bets ahead of inflation data due next week.

Asian Indices	Last Trade	Change in Points	Change in %
Shanghai Composite	2,706.18	2.83	0.10
Hang Seng	22,420.37	-189.46	-0.84
Jakarta Composite	3,787.65	-18.54	-0.49
KLSE Composite	1,556.19	5.30	0.34
Nikkei 225	9,514.44	47.29	0.50
Straits Times	3,078.35	-19.22	-0.62
Seoul Composite	2,046.67	-24.75	-1.19
Taiwan Weighted	8,837.82	-163.12	-1.81

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