Weakness persist in equity markets; Sensex, Nifty overlooks IIP numbers

Indian equity markets remained under pressure on the back of weak Asian markets and disappointing earnings by Infosys. India's annual industrial output growth measured by index of industrial production (IIP), showed better than expected growth of 2.4% at 170.2 for the month of May 2012 versus a negligible growth figure of 0.1% in April, which later was revised to show a contraction of 0.9%. Investors still trading cautious as IIP numbers reflects that the economy continues to grow at a slower pace and still struggling with a high fiscal deficit, waning global investors interest, which will prevent the RBI to consider rate cut. In currency markets, Indian rupee trading flat in negative territory against American currency on the back of increasing demand for dollars from oil importers. On sectoral front IT stocks are trading in red on disappointing performance reported by IT bellwether Infosys. Stocks from realty, consumer durables, banking and power sectors were mostly trading weak, while select oil, FMCG and healthcare stocks were trading in positive territory. In global markets, most of the Asian shares were trading in red. Back home, the market breadth favoring negative trend; there were 884 shares on the gaining side against 1,429 shares on the losing side while 104 shares remained unchanged.

The BSE Sensex is currently trading at 17,282.68 down by 206.46 points or 1.18% after trading as high as 17,329.46 and as low as 17,244.09. There were 12 stocks advancing against 18 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index down 0.62% while Small cap index was down 0.63%.

The only gainers on the BSE sectoral space were, Oil & Gas up by 0.34%, FMCG up by 0.14%. While, IT down by 5.49%, TECk down by 4.51%, Realty down by 1.19, CD down by 0.93% and Bankex down by 0.75% were the top losers on the index.

Hindustan Unilever up by 1.00%, ONGC up by 0.93%, Cipla up by 0.59%, BHEL up by 0.56% and Hero MotoCorp up by 0.47% were the major gainers on the Sensex, while Infosys down by 8.64%, Wipro down by 4.45%, TCS down by 2.13%, Bharti Airtel down by 1.93% and Mahindra & Mahindra down by 1.36% were the major losers on the index.

Meanwhile, opposing a blanket rule fearing adverse impact on flow of foreign direct investments (FDI) in the sector, Finance Ministry’s special group has suggested that it could consider permitting up to 49% FDI in the automatic route for Brownfield investments in pharmaceuticals sector, given the company’s management control remains in Indian hands. However, the investment beyond the 49% cap would have to pass the Foreign Investment Promotion Board’s (FIPB) muster.

The move could mean substantial relaxation of the current FDI policy, which was tightened in October last year. As per extant policy, 100% FDI in green field investments would be allowed but only after FIPB authorization.

Towards this development, the department of pharmaceuticals in the first week of June proposed that the conditions being finalized for overseas acquisition in Indian pharmaceuticals companies should be applicable for acquisitions of over 49% stake. 

Meanwhile, sensing a prolonged inter-ministerial squabbling over crucial components of the new policy the Prime Minister's Office, recently wrote to finance and industry ministries seeking a progress report on implementation of the changes in the foreign direct investment policy in the pharmaceutical sector, which was finalized nine months ago. 

The S&P CNX Nifty is currently trading at 5252.00, down  by 54.30 points or 1.02% after trading as high as 5,261.65 and as low as 5,234.30. There were 17 stocks advancing against 33 declines on the index.

The top gainers on the Nifty were JP Associates up by 1.44%, BPCL up by 1.22%, Cairn up by 1.22%, ONGC up by 1.08% and Hero MotoCorp up by 0.95%. Infosys down by 8.77%, Wipro down by 4.62%, HCL Tech down by 2.78%, TCS down by 2.12% and Bharti Airtel down by 1.82% was the major losers on the index.

Most of the Asian equity indices were trading in the red; Hang Seng index down by 1.60%, Nikkei 225 down 1.48%, Kospi Composite Index down 2.24%, Taiwan Weighted down 1.75%, Strait Times down 0.37%, Jakarta Composite down 1.08% and KLSE Composite down 0.10%. On the flipside, only Shanghai Composite was up 0.36%.