Post session - Quick review

Indian equity markets witnessed a horrendous session of trade as barometer gauges suffered brutal laceration right from the start of the trade, as slew of negative news flow, sapped into the risk appetite of the already wary investors. The much awaited session of trade, turned out to be a sort of nightmare, as the bourses protracting last session’s correction mood, collapsed over a percentage and a half.

30 scrip sensitive index Sensex, despite recovery from intra-day low level, lost over 200 points to finish near the 17200 psychological level. While, the widely followed index, Nifty, after plummeting over a percent ended below the 5250 bastion. The broader indices staged relative outperformance, as both Midcap and Smallcap index, went home with loss of just over half a percentage points.

The sentiment remained sour since the start of the trade, after India’s second largest information technology company, Infosys, slashed its sales forecast for this fiscal to 5 per cent, much lower than 8-10 per cent predicted at the end of the March quarter. Although, the company registered 33% surge in its June quarter net profit at Rs 2,290 crore, but the lower revenue guidance provided by the company sent the stock tanking above 10%, the rub-off effect of which was seen across entire IT space.

Meanwhile, May’s industrial output, which despite registering better than expected pace of growth, also contributed to the carnage, as it dimmed hopes of rate cut by India’s most aggressive Central bank in its upcoming monetary policy review on July 31, RBI was unlikely to draw any sense of comfort from this indicator, in light of sluggish domestic and global parameters. India’s index of industrial production (IIP), a key measure of industrial output, grew by 2.4% in May 2012 at 170.2, from the same period in the past fiscal, against the expectations of 1.8%.negligible yet positive growth of 0.1% in April was revised down to contraction of 0.9%. Further, in a major disappointment, April month’s IIP data which showcased negligible yet positive growth of 0.1% in April was revised down to contraction of 0.9%.

Bleak global cues also added to the downside of the markets. European shares were dragged lower after minutes of the US Federal Reserve's June meeting dampened hopes for more risk-asset-boosting stimulus in the near term. The Fed minutes showed the world's biggest economy would have to worsen before the central bank eased monetary policy further.

Meanwhile, Asian pacific shares ended in a gut as a surprise rate cut from South Korea and an unexpected drop in Australian employment exuberated worries about global economic growth, further sapping appetite already hit by lack of clear clues on possible US stimulus. Closer home, Telecom stocks such Bharti Airtel, Idea Cellular and Reliance Communicated too slid ahead of the outcome of Empowered Group of Minister meet on controversial spectrum pricing issue. Crucial aspects like pricing of spectrum, one-time fee, roll-out obligations, terms of payment and the timeline for selecting the auctioneer, will be taken on board for discussion.

On the BSE sectoral front, Realty and Oil & Gas were the only counter that depicted resilience, while all the other 11 sectoral indices concluded in red. Information Technology, Consumer Durable and Capital Goods emerged as the weakest link in the trade. Upstream oil companies gained tracing the higher brent crude prices. Major beneficiaries were Cairn India, ONGC and Oil India. The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 1173:1626 while 118 scrips remained unchanged. (Provisional)

The BSE Sensex lost 270.67 points or 1.55% and settled at 17,218.47. The index touched a high and a low of 17,329.46 and 17,181.17 respectively. 8 stocks were seen advancing against 22 declining ones on the index (Provisional)

The BSE Mid-cap index lost 0.67% while Small-cap index was down 0.69%. (Provisional)

On the BSE Sectoral front, Realty up 0.59% and Oil & Gas up 0.23% were the only gainers while, IT down 5.31%, TECk down 4.62%, Consumer Durable down 2.02%, Capital Goods down 1.53% and Auto down 1.21% were the top losers.

The top gainers on the Sensex were ONGC up 1.37%, GAIL India up 1.12%, Hero MotoCorp up 1.05%, Cipla up 0.54% and Coal India up 0.38% while, Infosys down 8.35%, Wipro down 4.16%, Bharti Airtel down 3.07%, Tata Motors down 2.20% and M&M down 2.17% were the top losers in the index. (Provisional)

Meanwhile, registering a better than expected pace of growth, India’s index of industrial production (IIP), a key measure of industrial output, grew by 2.4% in May 2012 at 170.2, from the same period in the past fiscal, against the expectations of 1.8%. Moreover, the cumulative growth for the period April-May 2012-13 stood at 0.8% over the corresponding period of the previous year.

Mainly driven by the manufacturing output, although the May industrial production marks some improvement, but the reliability of the series remains in question after negligible yet positive growth of 0.1% in April was revised down to contraction of 0.9%.

The industrial output has remained fragile in the past few months as growth in all three sectors viz. mining, manufacturing and electricity got dampened. However, this time around, the manufacturing sector, which accounts for about 76% of industrial output, emerged as the factor for delight. The IIP for Mining, Manufacturing and Electricity sectors for the month of May 2012 stand at 129.7, 178.9 and 162.3 respectively, with the corresponding growth rates of -0.9%, 2.5% and 5.9% as compared to May 2011.

However, Capital goods output, a key investment indicator, contracted to 7.7%, highlighting that companies are still wary of making investments in high-interest, uncertain economic climate. Capital goods, so far, have managed to show growth only once in the last eight months. Consumer goods, on the other hand, grew at a more robust 4.3%, driven by a 9.3% surge in durables, despite a meager 0.1% growth in non-durables.

The Reserve Bank of India (RBI) is unlikely to draw some sense of comfort from this indicator, as things might turn around, particularly due to monsoon cycle. Further, with both global and domestic parameters remaining largely unchanged since its last meeting on June 18, 2012, the central bank has limited room for rate cuts, since the slowdown remains supply-driven. However, besides this, June wholesale price inflation (WPI), scheduled for July 16, the notoriously volatile IIP data would be helpful for the RBI to take a call on the rate cuts at a policy review on July 31.  India VIX, a gauge for market’s short term expectation of volatility gained 1.74% at 18.71 from its previous close of 18.39 on Wednesday. (Provisional)

The S&P CNX Nifty lost 76.00 points or 1.43% to settle at 5,230.30. The index touched high and low of 5,261.75 and 5,217.70 respectively. 14 stocks advanced against 36 declining ones on the index. (Provisional)

The top gainers on the Nifty were JP Associates up 2.49%, Hero MotoCorp up 1.65%, ONGC up 1.46%, BPCL up 1.44% and GAIL India up 1.37%. On the other hand, Infosys down 8.50%, Wipro down 4.06%, Bharti Airtel down 3.01%, IDFC down 2.71% and PNB down 2.51% were the top losers. (Provisional)

The European markets were trading in red, with France's CAC 40 down 0.46%, Germany's DAX down 0.84% and Britain’s FTSE 100 down 0.69%.

Asian markets fell Thursday on the back of worries over region's economic condition ahead of China's second-quarter growth data tomorrow. Australia's rise in unemployment also pressurized the markets to an extent. However, investors were cautious due surprise rate cut in South Korea and a 50-basis point cut in Brazil, as these rate cuts have negatively impacted banks’ net interest rate income. After weak opening in the morning, Japan's Nikkei Average slipped further, dropping 1.3% after the conclusion of the Bank of Japan's policy meeting, where central bankers decided to keep its monetary policy mainly unchanged, though it did slightly alter its asset purchase program. The bank further decided to reduce the amount of fixed rate loans it offers by ¥5 trillion, and increase the purchase of Treasury-discount bills by the same amount.