Supportive European cues help Sensex digests horrendous Q4 GDP data; fall 0.5%

The May series futures and options contract expiry day turned out to be a resilient session for the stock markets in India, which digested the horrendous fourth quarter economic growth numbers and settled only with moderate cuts of around half a percent. The benchmark equity indices staged a late recovery following some short covering in the derivative expiry session while optimism in European markets too let its much needed support to domestic bourses.

However, investors continued to fear about the uncertainty over Asia’s third largest economy’s expansion rate after it plunged off the cliff to a meager 5.3% growth rate in the January - March quarter from 9.2% in Q4 2011, the lowest since 2002-03 when the economy grew by 4%. The GDP growth for 2011-12 has also been revised downwards to 6.5 percent as against the advance estimate of 6.9 percent released in February 2012.

The markets also were pummeled by the weak cues from money market in the first half, however the beleaguered currency recovered a great deal in the second half on the back of buzz that the Reserve Bank of India has asked state oil companies to restrict purchases of dollars through four state-run banks. Though RBI and senior officials later clarified that the reports were untrue however, that did not lead to further depreciation in rupee, thereby supporting sentiments in equity markets.

Meanwhile, a separate report showed India's eight core industries growth having a combined weight of around 38% percent in the IIP slowed down to 2.2 percent in April from the 4.2 percent in last April, mainly due to poor performance by crude oil, natural gas, petroleum and fertilizer sectors.

On the BSE sectoral front, investors were once again seen squaring off hefty positions from the rate sensitive Automobile counter, which got battered by close to two percent, being the top laggard in the space. Other rate sensitive Bankex pocket along with Capital Goods sector got pounded by around a percent and prevented the frontline indices from gaining strength.

On the other hand, investors covered hefty short positions in the high beta Realty pocket, which climbed about a percent. On the global front, Asian markets continued to show weakness as most indices settled on a negative note after Japan’s industrial production rose merely 0.2% in April as against March month’s 1.3 percent increase.

But European markets showed some strength and traded on a positive note, recovering after the previous session's sharp losses but investors closely watched the debt crisis in the region and shifted focus to a series of economic data due from the US later in the day.

Back home, the NSE’s 50-share broadly followed index Nifty, dropped by half a percent to settle above the psychological 4,900 support level while Bombay Stock Exchange’s Sensitive Index - Sensex shed around a hundred points to finish below the crucial 16,200 mark. Moreover, the broader markets showed some resilience with the Midcap index bucking the pessimistic trend and settling with gains of around one third of a percent.

The markets fell expectedly on strong volumes of over Rs 2.57 lakh crore while the turnover for NSE F&O segment remained on the higher side as compared to that on Wednesday at over Rs 1.95 lakh crore. The market breadth remained pessimistic as there were 1,184 shares on the gaining side against 1,416 shares on the losing side while 107 shares remained unchanged.

On the F&O front, May series Nifty and Sensex got pounded by around five percent. Besides, the broader markets too snapped the series on a weak note with the mid cap index underperforming not only its larger peers but also the Small Cap index. The Automobile and Banking counters remained among the prominent laggards in the series while the IT index settled with gains of around 3%.

From the expiry perspective, market wide rollover of 63.89% was observed in the series which was higher than the three month average of 60.85% while Nifty rollovers were at 45.58%, lower than 3 month average of 56.7%. Sectorally, the capital goods, metals, financial and realty counters witnessed high rollovers while sectors like technology, oil & gas, cement and pharma pockets observed relatively low rolls. Among individual stocks, vast rollovers were witnessed in heavyweights including BHEL (74%), Maruti (71%), Sesa Goa (70%) while low rollovers were seen in stocks like Wipro (35%), ITC (38%) and Tech Mahindra (39%).

Finally, the BSE Sensex lost 93.62 points or 0.57% to settle at 16,218.53, while the S&P CNX Nifty declined by 26.50 points or 0.54% to close at 4,924.25.

The BSE Sensex touched a high and a low of 16,277.48 and 16,086.06 respectively. The BSE Mid cap index was up by 0.36% and Small cap index down by 0.57%.

The major gainers on the Sensex were Hindalco up by 2.06%, NTPC up by 1.28%, Hindustan Unilever up by 1.26%, Cipla up by 1.08% and HDFC Bank up by 1.06%, while Tata Motors down by 4.17%, ICICI Bank down by 4.00%, Maruti Suzuki down by 3.86%, Jindal Steel down by 2.57% and Sun Pharma down by 2.37% were the major losers on the index.

The top gainers on the BSE sectoral space were Realty up by 1.00%, IT up by 0.35%, TECk up by 0.31%, PSU up by 0.29% and Power up by 0.21%, while Auto down by 1.96%, Bankex down by 0.87%, Consumer Durables (CD) down by 0.81%, Capital Goods (CG) down by 0.70% and Metal down by 0.21% were top losers on the BSE sectoral space.

Meanwhile, the economy has grown by a mere 5.3% in the fourth quarter of 2011-12 - lowest quarterly growth rate in 3 years as against 7.8% in the same quarter last year. It is much below the expected number of 6.1% and the major dampening has come in from the manufacturing sector. For the entire year, the GDP growth has now been revised to 6.5%. For the fourth quarter, services grew 7.9% compared to 10.6% last year, farm sector growth fell to 1.7% from 7.5%, manufacturing sector logged negative growth of 0.3% against 7.6%, and construction sector growth fell to 4.8% from 8%.

As stated earlier there has been a downward revision of GDP numbers for FY12. As per the Central Statistics Office (CSO), the downward revision has come in because of the lower performance in manufacturing and 'trade, hotels, transport and communications' than expected.

For 2011-12, the revised GDP growth estimate has taken into account the agricultural growth at 2.8%, higher than the level of 2.5% at the advance estimate stage. The manufacturing sector output is pegged at 2.5%, lower than the 3.9% growth put out at the advance estimate stage. Construction sector is now estimated to have grown 5.3% in 2011-12, higher than 4.8% estimated earlier in February this year.

With the numbers coming in lesser than expected the focus has again shifted towards the RBI’s monetary policy. C Rangarajan, chairman, Prime Minister’s Economic Advisory Council has stated that the RBI shall continue to focus on inflation and may not go in for another rate cut. Some economists on the other hand, feel that inflation probably has now bottomed out and the RBI should focus on reviving growth. Economists are also now less enthusiastic about the GDP numbers of the current fiscal and feel that they will hover around the 6% mark.

The S&P CNX Nifty touched a high and low 4,949.25 and 4,883.55 respectively.

The top gainers on the Nifty were JP Associates up by 3.66%, Asian Paints up by 3.50%, IDFC up by 3.37%, SAIL up by 2.55% and PNB up by 2.46%.

On the flipside, Maruti down by 4.00%, ICICI Bank down by 3.90%, Tata Motors down by 3.89%, Jindal Steel down by 2.71% and Bank of Baroda down by 2.21% were the top losers on the index.

The European markets were trading in green, as France's CAC 40 up by 0.79%, Britain’s FTSE 100 up by 0.63%, while Germany's DAX up by 0.16%.

Asian markets continued their southbound journey for second day in a row on Thursday following selloff in US market overnight as yields on Spain’s 10-year bonds reached as high as 6.65%. The sell-off came after the European Central Bank said in a statement that it had not been consulted on the bailout for Bankia, Spain’s fourth-largest bank, and that such a recapitalization could not be provided by the Euro-zone central bank. The sentiments were also got clobbered after Chinese interest-rate swaps hit 18-month lows on Thursday on abundant liquidity and expectations of loose monetary policy in the coming months. One-year interest-rate swaps fell nine basis points to 2.42 percent near midday, their lowest since November 2010.

Meanwhile, Japanese Nikkei snapped the session with cut of over a percent, as the country reported anemic factory output growth of 0.2% in April, slower than expected. While, Taiwan benchmark fell over half a percent on Thursday, joining regional bourses in slides on mounting concern over Europe’s ability to solve its growing debt crisis and led by heavyweights such as TSMC. In addition Kospi edged lower as crude oil refiners underperformed; SK Innovation slid 3.5 percent while S-Oil fell 3.2 percent.