Markets reverse gears; slip into negative territory

Indian equity benchmarks erased all early gains and entered into negative territory on the back of profit booking at higher levels in the frontline blue - chips counters, in early noon session.  Sentiment were under pressure with report that the Industrial production (IIP) contracted by 3.2 per cent in November -- the lowest level in over four years -- due to poor performance of manufacturing sector and a sharp decline in capital goods output. Meanwhile, rising for the fifth straight month, retail inflation or CPI, rose to 5.61 per cent in December, limiting the headroom for the Reserve Bank to lower rate next month. The broader markets are also underperforming with BSE Midcap and Smallcap indices down by 1.00% and 2.47% each.

On the global front, Asian markets were trading mostly in green, as the yuan stabilised for the third straight day. Back home, both the sensex and Nifty were trading below their crucial 24,600 and 7,500 levels, respectively. In scrip specific development, share of DCB Bank was trading higher after the bank’s gross non-performing assets (NPA) as a percentage of total advances declined marginally to 1.98 per cent at the end of December quarter (Q3FY16), from 1.99 per cent in the previous quarter. Net NPA declined to 1.12 per cent from 1.16 per cent on a sequential basis. On the flip side, Tata Consultancy Services (TCS) hit fresh 18-month low on the BSE, after the company for the sixth quarter in a row missed the Street’s revenue estimates during the third quarter ended December 31, 2015 (Q3FY16). 

The BSE Sensex is currently trading at 24566.98, down by 115.05 points or 0.47% after trading in a range of 24514.72 and 24909.22. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.00%, while Small cap index down by 2.47%.

The top losing sectoral indices on the BSE were Power down by 2.12%, Capital Goods down by 1.97%, Realty down by 1.58%, PSU down by 1.26% and Metal down by 1.24%, while there were no gainers on the sectoral index.

The top gainers on the Sensex were Tata Motors up by 1.23%, Mahindra & Mahindra up by 1.08%, Reliance Industries up by 1.04%, Infosys up by 1.03% and ITC up by 0.27%. On the flip side, Adani Ports &Special down by 3.49%, TCS down by 2.67%, Larsen & Toubro down by 2.34%, Axis Bank down by 2.14% and SBI down by 1.68% were the top losers.

Meanwhile, showing signs of disappointment, India’s annual industrial output growth, measured by index of industrial production (IIP), contracted in the month of November, marking its worst performance since October 2011. Industrial output contracted 3.2 per cent in November from a year earlier, compared with upwardly revised growth of 9.9 per cent the previous month, due to poor performance of manufacturing sector and a sharp decline in capital goods output.

As per the data released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation, Index of Industrial Production (IIP) with base 2004-05 for the month of November 2015 stood at 166.6, which was 3.2 percent lower as compared to the level in the month of November 2014. The cumulative growth for the period April-November 2015 over the corresponding period of the previous year stands at 3.9 percent.  On the sectoral basis, growth of manufacturing index which occupies 75.52% weightage in the overall index, contracted by 4.4 per cent as against a growth of 4.7 per cent in the same month last year. The decline in manufacturing output was largely due to a shift in the festival season to November this year as opposed to October last year, causing a spike in growth in the latter month.

The electricity sector, which constitutes about 10 per cent of the index, also showed dismal performance as it grew by meagre 0.7 per cent in November 2015 compared to 10 per cent growth in same month a year ago. Meanwhile, the mining sector output grew by 2.3 per cent in November 2015 against 4 per cent growth in the same month a year ago. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of November 2015 stand at 131.5, 171.9 and 175.6 respectively. The cumulative growth in three sectors during April-November 2015 over the corresponding period of 2014 has been 2.1 percent, 3.9 percent and 4.6 percent respectively. In terms of industries, seventeen out of the twenty two industry groups in the manufacturing sector have shown negative growth during the month of November 2015 as compared to the corresponding month of the previous year.

As per Use-based classification, the growth rates in November 2015 over November 2014 are (-) 0.7 percent in Basic goods, (-) 24.4 percent in Capital goods and (-) 0.7 percent in Intermediate goods (Statement III).  The Consumer durables and Consumer non-durables have recorded growth of 12.5 percent and (-) 4.7 percent respectively, with the overall growth in Consumer goods being 1.3 percent.

The dichotomy of rising inflation accompanying a decline in industrial output poses a fresh problem to the government of how to spur domestic demand, Chief Economic Adviser Arvind Subramanian has said that 'This number (IIP) is effected by two factors - one is that Diwali fell in November, so there were fewer working days, and also some impact of Chennai flood.

The CNX Nifty is currently trading at 7481.90, down by 28.40 points or 0.38% after trading in a range of 7460.30 and 7585.95. There were 13 stocks advancing against 35 stocks declining on the index.

The top gainers on Nifty were Indusind Bank up by 2.28%, Zee Entertainment up by 1.40%, Tata Motors up by 1.27%, Infosys up by 1.19% and Mahindra & Mahindra up by 1.06%. On the flip side, Vedanta down by 4.21%, Adani Ports &Special down by 3.59%, Tata Power down by 2.91%, Bank Of Baroda down by 2.90% and TCS down by 2.82% were the top losers.

Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 1.26 points or 0.08% to 1,642.63, KOSPI Index increased 28.82 points or 1.52% to 1,919.68, Jakarta Composite increased 40.33 points or 0.89% to 4,552.85, Taiwan Weighted increased 56.16 points or 0.72% to 7,824.61, Nikkei 225 increased 430.66 points or 2.5% to 17,649.62 and Hang Seng increased 443.23 points or 2.25% to 20,154.99, while Shanghai Composite decreased 9.97 points or 0.33% to 3,012.89.