Markets pare all early gains despite better than expected IIP numbers

Indian equity markets pared all its early gains despite better than expected IIP numbers. Benchmarks opened on an upbeat note this morning following a surprise 75-basis points cut in Cash Reserve Ratio (CRR) by Reserve Bank of India on last Friday. Meanwhile, Index of Industrial Production (IIP) numbers for the month of January rose to 6.8% against 1.8% in December. With this industrial output data, expectations of a rate cut from the Reserve Bank of India at its policy review later this week has gone down. On the sectoral front, banking shares rallied after the RBI's surprise CRR cut. Capital goods, consumer durables and realty stocks were trading with notable gains, while IT, TECk and metal stocks erased early gains. On the global front, Asian shares were trading lower on concerns over a slowdown in China. Back home, the market breadth favoring the positive trend; there were 1,350 shares on the gaining side against 966 shares on the losing side while 100 shares remained unchanged.

The BSE Sensex is currently trading at 17,523.32, up by 20.08 points or 0.11%. The index has touched a high and a low of 17772.10 and 17,494.65 respectively. There were 14 stocks advancing against 15 declines and one remained unchanged on the index.

The broader indices were outperforming frontline indices; the BSE Mid cap and Small cap indices spurted by 0.56% and 0.53% respectively.

The top gaining sectoral indices on the BSE were, CG up by 1.68%, CD up by 1.19%, Bankex up by 0.80%, Realty up by 0.60% and Oil & Gas up by 0.56%. While, Information Technology down by 0.30%, TECk down by 1.11%, Metal down by 0.09%, HC and Auto down by 0.093% were top losers on the index.

The top gainers on the Sensex were SBI up by 3.23%, L&T up by 2.52%, RIL up by 1.37%, BHEL up by 1.35% and Bajaj Auto up by 1.25%.

On the flip side, Infosys down by 2.12%, Cipla down by 2.06%, TCS down by 1.63%, M&M down by 1.37% and NTPC down by 1.35% remained the top losers on the Sensex.

Meanwhile, the government has decided to lift the ban on cotton exports that was imposed last week. The roll back ends a week of protests from within the government and opposition. The Commerce, Industry and Textiles Minister, Anand Sharma, said in a statement that ‘keeping in view the facts, the interests of the farmers, interest of the industry, trade, a balanced view has been considered by the (Empowered) Group of Ministers to roll back the ban’.

The Directorate General of Foreign Trade (DGFT), which is under the commerce department, had banned cotton exports on March 5 on the grounds that the domestic stocks of the fibre had fallen below recommended levels. As per DGFT, the country had already shipped 10 lakh bales more than the exportable surplus which was impacting domestic availability. Also the domestic production of cotton had been revised downwards by the Ministry of Agriculture for the current year which could lead to further shortages.

However, the ban had brought sharp reactions from the traders and farmers as they claimed that domestic prices were falling due to the ban. Cotton prices crashed to levels around Rs 3,000 a quintal from the Rs 4,200 last month. In some cases, farmers reportedly even sold at Rs 2,500 a quintal. Moreover, the cotton export ban followed registration of over 12.5 million bales (of 170 kg each) of cotton for exports.

The agriculture minister, Sharad Pawar also opposed the ban strongly and was upset that it had been imposed without informing him. Further, the ban had brought the cotton trade to a halt in Maharashtra, Andhra Pradesh, Gujarat and Karnataka. China, which is India’s largest importer of cotton, had also termed the ban ‘irresponsible’.

The S&P CNX Nifty is currently trading at 5,339.75, higher by 6.20 points or 0.12%. The index has touched a high and a low of 5,421.90 and 5,327.30 respectively. There were 30 stocks advancing against 20 declining ones on the index.

The top gainers of the Nifty were SBI up by 3.08%, L&T up by 2.43%, ICICI Bank up by 1.43%, Reliance up by 1.42% and BHEL up by 1.35%.

On the flip side, Cipla down by 2.06%, Infosys down by 2.05%, TCS down by 1.87%, NTPC down by 1.53% and M&M down by 1.47% remained the top losers on the index.

Asian equity indices were trading in the red; Shanghai Composite lost 0.66%, Hang Seng declined by 0.73%, Jakarta Composite slid 0.15%, KLSE Composite shed 0.68%, Nikkei 225 gained down by 0.40% and Straits Times was down by 0.02%, Seoul Composite lost 0.78% and Taiwan Weighted was down by 1.10%.