Slow core infrastructure growth decelerate bourses speed

Local bourses after heading for its biggest weekly advance since end of March post Greece met European Union conditions to prevent a default, have recoiled now, as the 30 scrip sensitive index after momentarily crossing the 19k level has come off it. Basically, the slow growth in eight core infrastructure industries to 5.3% in May against 7.4%during the same period a year ago has dampened the sentiment. However, the momentum continues to be positive as investors are growing less risk-averse as Greece's debt crisis is more or less under control.  On the global front, the US markets closed higher for the fourth straight day on Thursday, with all the major indices ending up by over a percent after Greece cleared the final hurdle needed to receive its next installment of emergency loans. Meanwhile, the Asian stocks too deriving the energy from them are trading on a firm note, barring KLSE Composite which too has pared almost all its losses and is trading down by meager 0.02%. The US future indices are too showing an uptick in the screen trade.

Back home, the new month auto sales numbers have started start trickling in, with the Car market leader - Maruti Suzuki (India) reporting decline of 8.85% in its sale for the month of June 2011 which stood at total of 80298 vehicles being sold, thereby taking the stock lower by 1.81%. Meanwhile, two-wheeler maker, TVS Motor Company after reporting a growth of 14% in its June sales has declined by 0.28%. On the BSE sectoral front, stocks from Realty, IT and FMCG counters are ruling the trade, while weakness has entered into Consumer Durable space, which is trading lower over 0.25%. However, the broader indices seem in no mood to stop as they captured gains of over 1%, thereby outperforming their larger peers. Though the 30 scrip sensitive index is trading off the 19 k mark, the widely followed Nifty has kept its pace around the 5600 level. The overall market breadth on BSE is in the favour of advances which have battered out declines in the ratio of 1648:661, while 94 shares remained unchanged.

The BSE Sensex is currently trading at 18,927.65, up by 81.78 points or 0.43%. The index has touched high and low of 19,031.38 and 18,887.91 respectively. There were 22 stocks advancing against 8 declining one's on the index.

The broader indices keeping up the pace were outperforming benchmarks; the BSE Mid cap and Small cap indices surged 1.00% and 1.09% respectively.

The top gaining sectoral indices on the BSE were, Realty up by 2.82%, IT up by 1.32%, FMCG up by 1.01%, PSU up by 0.81% and TECk was up by 0.77%. While, weakness had entered Consumer Durable space which was trading lower by 0.27%The top gainers on the Sensex were DLF up by 3.11%, RCom up by 2.82%, Hindalo Industries up by 2.35%, Sterlite Industries up by 1.81%, and Infosys was up by 1.68%.

On the flip side, Bharti Airtel was down by 2.49%, Maruti Suzuki was down by 1.51%, HUL was down by 1.15%, RIL was down by 0.57%  and Cipla was down by 0.56% were the only losers on the Sensex.

Meanwhile, the core infrastructure industries registered a slowdown in the pace of growth in the month of May, coming down at 5.3% compared to 7.4% registered in May 2010, mainly due to increased interest rates and confusion on policies. The RBI has raised interest rates 10 times since March 2010 to tame inflationary pressures and has made its intention clear to sacrifice some growth to calm inflation, so the sluggishness in the industrial sector comes as an obvious outcome. According to data released by ministry of commerce and industries, in the first two months of the fiscal (April-May) 2011-12, eight core industries registered a growth of 4.9% as against 7.9% during the corresponding period of the previous year 2010-11.

The eight core infrastructure include, crude oil, petroleum refinery products, natural gas, fertilisers, coal, electricity, cement and finished steel, and have weight of 37.90% in the Index of Industrial Production. The fertilizers and natural gas are two new industries added to the core infra industries. In month of May, crude oil, electricity, fertilizers, coal, Refinery products and steel registered positive growth on the other hand, cement and Natural gas show negative growth. Electricity generation which has weight of 10.32% in the IIP registered a growth of 10.3% in May 2011 compared to a growth of 6.4% in May 2010. Electricity generation grew by 8.4% during April-May 2011-12 compared to 6.7% during the same period of 2010-11. Crude Oil production which has weight of 5.22% in the IIP registered a growth of 9.7% in May 2011 compared to a growth of 5.8% in same month last year. For April-May 2011-12 the growth in the segment was 10.3% compared to 5.5% during the same period of 2010-11.

Fertilizer production which has weight of 1.25% in the IIP registered a growth of  7.3% in May 2011 compared to (-) 6.7% in May 2010, while the production grew by 4.6% during April-May 2011-12 compared to an increase of 1.9% during the same period of 2010-11. Steel production which has weight of 6.68% in the IIP registered a growth of 6.1% in May 2011 compared to 9.0% in May 2010 and grew by 5.5% during April-May 2011-12 compared to an increase of 10.9% during the same period of 2010-11. Petroleum refinery production which has weight of 5.94% in the IIP registered a growth of 4.5% compared to growth of 7.7% in May 2010. For April- May growth of the segment was recorded at 5.6% compared to (-) 6.5% during the same period of 2010-11. Coal production with the weight of 4.38% in the IIP registered a growth of 1.1% in May 2011 compared to growth of 0.3% in May 2010. Coal production grew by 1.9% during April-May 2011-12 compared to an increase of (-) 1.3% during the same period of 2010-11. 

However, Natural Gas production with the weight of 1.71% in the IIP registered de-growth of (-) 9.6% in May 2011 compared to growth of 34.4% in May 2010. For the first two months of the fiscal it registered a growth of (-) 9.5% compared to 43.5% during the same period of 2010-11. Cement production having weight of 2.41% in the IIP too registered de-growth of (-) 2.3% in May 2011 compared to a growth of 8.6% in May 2010. Cement Production grew by (-) 1.7% during April-May 2011-12 compared to an increase of 8.7% during the same period of 2010-11.

The core infra sector is growing at the slow pace however, six industries have shown positive growth year-on-year under observation and for the first two months of the fiscal. This indicates that the core sectors contribution to IIP is not waning, in April the core sector grew by 4.6% and IIP for April was 6.3%.The S&P CNX Nifty is currently trading at 5,667.55, higher by 20.15 points or 0.36%.  The index has touched a high and low of 5,705.80 and 5,655.60 respectively. There were 33 stocks advancing against 17 declines on the index.

The top gainers of the Nifty were DLF up by 3.42%, RCom up by 2.87%, Hindalco Industries up by 2.35%, IDFC up by 1.94%, Infosys up by 1.86%.

On the flip side, Bharti Airtel down by 2.46%, Maruti Suzuki down by 1.87%, HUL down by 1.38%, Ranbaxy down by 0.91% and Ambuja Cements down by 0.86% were the major losers on the index.

All the Asian equity indices barring KLSE Composite were trading in the green; Shanghai Composite was up 0.42%, Jakarta Composite was up by 1.55%, Nikkei 225 was up 0.69%, Straits Times was up 0.57%, Seoul Composite was up 1.40% and Taiwan Weighted was up by 0.97%.

On the flip side KLSE Composite was down by a meager 0.02 points. However, Stock markets in Hong Kong remained closed on account of Special Administration Region (SAR) Day.

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