Indian equities continue firm trade in the late afternoon session

Indian equities added gains to continue its firm trade in the late afternoon session on back of buying in the frontline blue chip counters. The sentiments were buoyed on hopes of an imminent interest rate cut by India’s central bank, which heightened after the February IIP numbers. The benchmark equity indices held steady despite government data indicating India's industrial output rose at a much slower than expected 4.1% in February from a year earlier. Traders were seen piling up position in Metal, Bankex and FMCG sector while selling was witnessed in IT, Health Care and TECk sector. Further, the next major trigger for the market will also be judged by the inflation numbers. On Friday, April 13, 2012, the government will unveil data on inflation based on the wholesale price index (WPI) for March 2012. Besides, all eyes are set on IT bellwether Infosys March Q4, 2012 result which the company will announce it on April 13, 2012, further giving direction for the markets. In the scrip specific development, stocks from the Aviation sector like Kingfisher, Spice Jet and Jet Airways, after an early rally, got thrashed in the afternoon session as reports showed that the Cabinet did not took up the issue of FDI in Aviation sector in their meeting. Neyveli Lignite Corporation was seen trading firm in green on reports that union cabinet has approved the state-run company's proposal to set up 1,980 megawatt power project in Uttar Pradesh.

On the global front, Asian markets were trading on a mix note while the European markets were trading in green on optimistic note. On the home turf, the NSE Nifty and BSE Sensex were trading below their psychological 5,300 and 17,400 levels respectively. The market breadth on BSE was in favor of advances in the ratio of 1690:952 while 143 scrips remained unchanged.

The BSE Sensex is currently trading at 17,384.53 up by 185.13 points or 1.08% after trading as high as 17,395.15 and as low as 17,276.87. There were 24 stocks advancing against 6 declines on the index.

The broader indices were trading on a strong note; the BSE Mid cap index surged 0.90% while Small cap soared 0.98%.

On the BSE sectoral space, Metal up 1.98%, Bankex up 1.98%, FMCG up 1.54%, Capital Goods up 1.49% and Auto up 1.45% were the major gainers, while IT down 0.39%, Health Care down 0.32% and TECk down 0.16% were the only laggard in the space.

Jindal Steel up 3.24%, SBI up 2.79%, Maruti Suzuki up 2.73%, Sterlite Industries up 2.69% and Hindalco Industries up 2.66% were the major gainers on the Sensex, while Sun Pharma down 1.41%, Infosys down 0.98%, ONGC down 0.95%, DLF down 0.84% and Wipro down 0.46% were the major losers in the index.

Meanwhile, with sharp revisions in the numbers for January, the IIP number has continued its trend of being an unpredictable number. India’s industrial production grew by a small 4.1% in February, much lower than the expectation of 6.6-6.7%. The January’s IIP number was revised to a shocking 1.1% as compared to the 6.8% put out earlier. With the revision, the actual growth in industrial activity now stands at 3% (m-o-m).

Manufacturing activity, which accounts for about 76% of industrial output in the country, grew by 4% in February compared to 7.5% year-on-year. Mining sector growth, which had been underperforming for a while, has come in at a positive 2%. Electricity production grew at a good 8% against 6.7% a year ago.

The capital goods number was the brightest spot and grew by 10.6% in February as against a contraction of 5.7% in the same month last year. Nonetheless it has been the first positive number in the past 2-3 months. Intermediate goods grew by (-) 0.6%. Mining also posted a positive number of 2.1% after many months of negativity.

The consumer durables have recorded a negative growth of 6.7% year-on-year, with the overall growth in consumer goods being (-) 0.2%. Basic goods registered a growth of 7.5%. Consumer non-durables, which were earlier reported to have grown by 42.1% in January 2012, have now been revised to 11.1%. For the month of February they grew by 5.1%. These numbers have been showing a strengthening trend in the past 2-3 months.

Core sector, which contributes almost 38% to industrial production, grew by a sharp 6.8% in February from a year earlier. Core sector comprises key infrastructure industries of coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity.

Since the IIP numbers still remain low, it has bolstered the expectation of the RBI going in for a rate cut in its upcoming monetary policy review. Further, not much should be read in the month-on-month data as IIP trends are more important than the monthly numbers. The stock markets barely reacted to the February industrial output numbers but the effect was reflected in bonds that rallied after the February numbers were released; consequently rupee fell marginally.

The S&P CNX Nifty is currently trading at 5,288.95, higher by 62.10 points or 1.19% after trading as high as 5,290.60 and as low as 5,246.75. There were 42 stocks advancing against 8 declines on the index.

The top gainers on the Nifty were Axis Bank up 3.65%, Jindal Steel up 3.20%, Sterlite industries up 3.19%, Maruti Suzuki up 3.01% and SBI up 2.99%.

Dr Reddy’s down 1.75%, Sun Pharma down 1.66%, Cairn India down 1.53%, Infosys down 1.19% and ONGC down 0.80% were the major losers on the index.

In the Asian space, Shanghai Composite jumped 1.82%, Hang Seng climbed 0.93%, Nikkei 225 rose 0.70%, Straits Times surged 1.15% and Taiwan Weighted up by 0.08%. On the flipside Jakarta Composite dropped 0.03% and Seoul Composite declined 0.39% were the only lagged among the Asian pack.

Stock markets in Malaysia remained closed on Wednesday on account of a nationwide holiday for Installation of the Yang Di-Pertuan Agong. The South Korean markets too remained shut on account of Assembly Members Election Day.

The European markets were trading in green as France’s CAC 40 advanced 0.27%, Germany’s DAX gained 0.76% and Britain’s FTSE 100 rose 0.07%.