Weak global cues, sluggish industrial growth drag benchmarks lower

Indian equity benchmarks have made negative start and are trading with a cut of over half a percent with frontline gauges tumbling below their crucial 26,900 (Sensex) and 8050 (Nifty) levels amid weak global cues and disappointing industrial growth in July. The industrial production declined to 0.5 per cent in July compared to an upwardly revised 3.9 per cent growth in June. Moreover, investors turned cautious ahead of the Inflation data based on wholesale price index (WPI) for August, which is expected to be released later during the day. However, losses remained capped after Ficci’s Survey indicated that India’s GDP will grow at 5.6 percent during 2014-15 and economic activity is expected to continue with this momentum in the second half of the current fiscal. Meanwhile, India’s retail inflation fell to 7.8 per cent in August from 8.0% in July.

Global cues too remained sluggish with the US markets ending lower in last session and traders remained cautious ahead of the Fed’s meeting next week. The Asian markets too were trading in the red at this point of time with some of the indices witnessing cut of over half a percent in the early hours, after weak Chinese factory and retail data announced during the weekend, added to the evidence that a slowdown is deepening.

Back home, on the sectoral front, metal, capital goods and realty remained the top losers on the BSE sectoral space while there were no gainers on the index. The broader indices too were reeling under pressure, while the market breadth on the BSE was negative; there were 1039 shares on the gaining side against 1151 shares on the losing side while 66 shares remain unchanged.

The BSE Sensex opened at 26998.07; around 63 points lower as compared to its previous closing of 27061.04, and has touched a high and a low of 26998.07 and 26813.02 respectively. The BSE Sensex is currently trading at 26847.87, down by 213.17 points or 0.79%. There were 4 stocks advancing against 26 stocks declining on the index.

The overall market breadth remained in the favour of decliners with 46.05% stocks advancing against 51.02% declines. The broader indices were trading in red; the BSE Mid cap index was down by 0.53%, while Small cap index down by 0.23%.

The losing sectoral indices on the BSE were Metal down by 1.38%, Capital Goods down by 1.25%, Realty down by 0.91%, Oil & Gas down by 0.82% and Power down by 0.82%, while there were no losers on the index.

The top gainers on the Sensex were Cipla up by 2.94%, HDFC Bank up by 0.99%, Dr. Reddys Lab up by 0.81% and Sun Pharma Industries up by 0.48%. On the flip side, Hindalco down by 2.73%, GAIL India down by 2.28%, Tata Steel down by 2.03%, Mahindra & Mahindra down by 1.54% and Axis Bank down by 1.43% were the top losers.

Meanwhile, in a big disappointment for the economy, India’s annual industrial output growth, measured by index of industrial production (IIP), expanded less than expected at 0.5% in July after posting growth of 3.4% in June. The cumulative growth for the period April-July 2014-15 over the corresponding period of the previous year stands at 3.3%.

On sectoral basis, growth of electricity index, which occupies 10.32% weightage in the overall index, grew at a slower pace by 11.7 % in the reported month as against 15.7% in June, while mining sector output growth too slowed down to 2.1% as compared to 4.3% growth in the previous month.  On the flip side, the output of manufacturing sector, which occupies 75.52% weightage in the overall index, de-grew by 1.0% in July from a growth figure 1.8% growth in June.

The cumulative growth of Mining, Manufacturing and Electricity sectors during April-July 2014-15 over the corresponding period of 2013-14 stood at 2.8%, 2.3% and 11.4% respectively.  On Use-based classification, capital goods production, a barometer for investments in the economy de-grew by 3.8% in July. 

The output of basic goods sector grew by 7.6% as against 9% in June, while consumer non-durables output grew by 2.9% in July as compared to 0.1% in June. However the output of consumer durables sector contracted by 20.90% in June as compared to massive contraction at 23.4% in June, indicating that consumers are reeling under high inflation which is impacting their spending.

This data is definitely a disheartening development for Narendra Modi government, which is looking to revive the economy by bolstering growth of manufacturing sector. However, in a bit of encouraging development, retail inflation numbers stayed below 8 percent for the third consecutive month. The consumer price index (CPI) inflation for the month of August was at 7.8% as against 7.96% in July.

The CNX Nifty opened at 8,070.35; around 35 points lower as compared to its previous closing of 8,105.50, and has touched a high and a low of 8,077.30 and 8,030.00 respectively.

The CNX Nifty is currently trading at 8043.15, down by 62.35 points or 0.77%. There were 10 stocks advancing against 40 stocks declining on the index.

The top gainers on Nifty were Cipla up by 2.82%, Lupin up by 1.56%, United Spirits up by 1.42%, Dr. Reddys Lab up by 0.98% and NMDC up by 0.96%. On the flip side, Hindalco down by 2.82%, GAIL India down by 2.32%, Jindal Steel & Power down by 2.29%, Tata Steel down by 1.84% and Asian Paints down by 1.75% were the top losers.

Asian markets were trading in the red. Straits Times contracted 1.62 points or 0.35% to 3,333.93, KOSPI Index dipped by 3.53 points or 0.17% to 2,038.33, Jakarta Composite decreased by 21.15 points or 0.41% to 5,122.56 and Shanghai Composite declined by 4.35 points or 0.19% to 2,327.60, FTSE Bursa Malaysia KLCI slipped by 9.18 points or 0.49% to 1,846.46, Hang Seng dropped by 201.16 points or 0.82% to 24,394.16 and Taiwan Weighted was down by 0.78 points or 0.01% to 9,216.01.