Indian equities exhibits weak trend; Sensex below 17,700 mark

Indian equities continue its slide in the late afternoon session as trade turned cautious on weaker than expected industrial production numbers which spooked investors’ sentiments. The index of industrial production (IIP) grew at 1.8% on year on year basis against consensus estimates of 2.8% while the IIP reading has also come in below the 5.9% growth rate in November. Traders were seen selling in Realty, Bankex and IT sector. Going forward, the market will take cues from government policy action and budget expectation. DLF and JP Associates from Realty pack was seen trading in red pulling the markets down. Axis Bank, ICICI Bank, HDFC Bank, SBI and Kotak Bank from Banking space was trading in red putting pressure on the markets. Infosys, TCS, Wipro and HCL Tech from IT stable were trading weak in red drifting the markets lower. Industry heavyweight RIL is trading in red with a cut of more than a percent exerting pressure on the market. In the scrip specific movement, Reliance Infrastructure, Reliance Power and Reliance Communications from AGA Group companies were trading weak in red. However, Tata Steel, Sesa Goa, BPCL, SAIL and Bajaj Auto were seen trading firm in green giving the much needed support. On the global front, all Asian markets were trading in red barring Shanghai Composite while the European markets were too trading on a pessimistic note. Investors remain nervous after European finance ministers demanded more steps overnight along with Greek parliament’s approval before releasing the aid. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,400 and 17,700 levels respectively. The market breadth on BSE was in favor of declines in the ratio of 1255:1544 while 121 scrips remained unchanged.

The BSE Sensex is currently trading at 17,696.70 down by 134.05 points or 0.75% after trading as high as 17,890.11 and as low as 17,627.14. There were 5 stocks advancing against 24 declines while 1 stock remained unchanged on the index.

The broader indices were trading on a weak note; the BSE Mid cap index eased 0.36% while Small cap was down 0.24%.

On the BSE sectoral space, there were no gainers while Realty down 1.37%, Bankex down 0.96%, IT down 0.87%, Capital Goods down 0.75% and Health Care down 0.74% were the major losers in the space.

Tata Steel up 4.11%, Bajaj Auto up 1.48%, Bharti Airtel up 0.41%, Tata Motors up 0.35% and ITC up 0.17% were the only gainers on the Sensex, while Hindalco Industries down 3.50%, Sterlite Industries down 2.42%, Maruti Suzuki down 2.17%, Gail India down 1.56% and ICICI Bank down 1.50% were the top losers in the index.

Meanwhile, India’s industrial output grew at a slow pace of 1.8% in December 2011 as compared to 8.1% in December last year. The dampening in growth came from mining, capital goods and manufacturing which grew at (-3.7%), 1.8% and (-16.5%) respectively year-on-year (y-o-y). The lower industrial output in the month was anticipated as the eight core industries had registered a muted growth of 3.1% in December (y-o-y).

The eight core industries together contribute 37.9% to the overall Index of Industrial Production (IIP). Even though the dampening was expected, it is much lesser than what was estimated by most economists. This could put additional pressure on the Reserve Bank of India (RBI) to cut rates to stimulate growth.

The numbers further reveal that electricity grew at a decent pace of 9.1% (y-o-y) as compared to 5.9% in December 2010. Basic goods grew at 4% and Intermediate goods witnessed a contraction of 2.8% (y-o-y). Consumer durables and Consumer non-durables have recorded growth of 5.3% and 13.4% respectively, with the overall growth in Consumer goods being 10.0% (y-o-y). Overall 15 out of 22 industry groups witnessed a positive growth in the month of December.

During April-December 2011, the IIP growth stood at 3.6% against 8.3% in the corresponding period a year-ago. Besides, the IIP figure for November 2011 has been revised to 5.94% from the provisional estimates of 5.9%. Some industries, however, have done well despite the economic slowdown. Fifteen of the 18 manufacturing industries that are considered for the index showed positive growth in December compared to the year-ago period.

Further, publishing, printing & reproduction of recorded media showed the most growth of 57.3%, followed by 41.2% in medical, precision & optical instruments, watches and clocks. Tobacco products also saw a 24.3% growth. Key industrial markets such as electrical machinery and apparatus have shown a negative growth of 48.8% followed by 7.4% in furniture, manufacturing and 6.4% in machinery and equipment.

Another index to watch out for was the HSBC Manufacturing Purchasing Managers' Index (PMI), which jumped to an eight-month high of 57.5 in January, up from 54.2 in December, as increased domestic and foreign demand pushed factory output to record its biggest one-month increase on record. Factory output and new orders jumped in December, suggesting that the factory sector might be in for better times, components of an earlier PMI showed.

Commenting on the IIP figures, the Planning Commission Deputy Chairman, Montek Singh Ahluwalia, said that the numbers are expected to bottom out in the third quarter and revive in the January-March period. Further, with little fiscal headroom to encourage growth, the burden is on the RBI to support the economy by cutting lending rates. The bank's next monetary policy meeting is scheduled on March 15, 2011.

The S&P CNX Nifty is currently trading at 5,362.80, lower by 49.55 points or 0.92% after trading as high as 5,427.75 and as low as 5,341.05. There were 10 stocks advancing against 40 declines on the index.

The top gainers on the Nifty were Tata Steel up 3.65%, Sesa Goa up 3.36%, BPCL up 2.18%, SAIL up 1.38% and Bajaj Auto up 1.15%.

IDFC down 4.03%, Hindalco down 3.87%, JP Associates down 3.43%, Reliance Infrastructure down 3.25% and Reliance Power down 2.85% were the major losers on the index.

In the Asian space, Hang Seng plunged 1.08%, Jakarta Composite plummeted 1.90%, Nikkei 225 declined 0.61%. Straits Times slipped 0.56%, Seoul Composite sank 1.04% and Taiwan Weighted dropped 0.61%. On the flipside, only Shanghai Composite rose 0.10%.

The European markets were trading in red with, France’s CAC 40 descended 0.73%, Germany’s DAX dropped 0.74% and Britain’s FTSE 100 shed 0.42%.