Distressed market gets clobbered out of shape; Infosys Q1 number disappoints

Distressed markets clobbered out of shape in Thursday’s trade with benchmarks ending the session with a cut of over 1.30%, weighed down majorly by technology stocks after disappointing performance reported by IT bellwether Infosys. The combination of domestic as well as global factors led to the brutal butchery across the board and local bourses snapped the session below their crucial 5,250 (Nifty) and 17,300 (Sensex) levels. The IT major also remained the top loser, pummeled nearly 9% due to lower than expected numbers in the first quarter of FY13 and weaker than expected guidance for financial year 2012-13.

Thereafter, bloodbath continued till day’s end as upset investors ignored the decent May index of industrial production (IIP) data and are eagerly waiting for inflation data (which will decide the RBI’s move in its quarterly monetary policy review on July 31) that is scheduled for July 16. May IIP improved to 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%. The cumulative growth for the period April-May 2012-13 stands at 0.8% over the corresponding period of the previous year. However, growth in major sectors like capital goods and mining came in negative. Manufacturing, electricity, basic goods and consumer goods growth was lower as compared to previous month.

Meanwhile, the sentiments also got bashed by infra stocks, which declined after Union Minister for Road Transport & Highways CP Joshi said the performance of road sector in Q1 June 2012 was disappointing. While, telecom stocks also got bludgeoned and declined for the second straight day ahead of a meeting of the empowered group of ministers on spectrum pricing which is scheduled later today, under its new head -- P Chidambaram.

Leads from the Asian counterparts too remained lackluster as most of the regional peers ended lower after the latest FOMC minutes didn’t provide any clues about further quantitative easing. Also, there were concerns on the global economy slowing as Australian employers cut more than estimated jobs. However, the Chinese market managed to claw its way back for the second successive session ahead of tomorrow’s Q2 GDP data. Moreover, European stocks dropped for a seventh day, extending the longest losing streak since November, on concerns that the global recovery is faltering.

Back home, banking stocks withered under pressure after May industrial output data dimmed hopes that Reserve Bank of India (RBI) would slash key policy rates in its upcoming monetary policy review on July 31. Bucking the trend, upstream oil companies (firms that are involved in the search, recovery or production of crude oil) gained tracing the higher Brent crude prices. Brent crude stayed above $100 per barrel on Thursday, after a more than 2% rally in the prior session, even as uncertainty over whether the US Federal Reserve would launch more stimulus measures curbed investor appetites for riskier assets.

The NSE’s 50-share broadly followed index Nifty, got clobbered by over seventy points to settle below the psychological 5,250 support level while Bombay Stock Exchange’s Sensitive Index - Sensex nosedived by over two hundred and fifty points to finish below the psychological 17,300 mark. Moreover, the broader markets too settled on a bleak note and ended with around half a percent cuts.

The markets got butchered on extremely large volumes of over Rs 1.64 lakh crore. The market breadth remained weak as there were 1,174 shares on the gaining side against 1,631 shares on the losing side while 112 shares remained unchanged.

The BSE Sensex shaved off 256.59 points or 1.47% to settle at 17,232.55, while the S&P CNX Nifty plunged by 71.05 points or 1.34% to close at 5,235.25.

The BSE Sensex touched a high and a low of 17,329.46 and 17,181.17 respectively. The BSE Mid cap index was down by 0.59% and Small cap index down by 0.66%.

ONGC up 1.42%, Hero MotoCorp up 0.88%, Gail India up 0.63%, Tata Power up 0.60% and Cipla up 0.54% were the major gainers on the Sensex, while Infosys down 8.15%, Wipro down 3.98%, Bharti Airtel down 3.04%, Mahindra & Mahindra down 2.09% and Tata Motors down 1.97% were top losers on the index.

The only gainer on the BSE sectoral space was Realty up 0.94%, Oil & Gas up 0.27%, while IT down 5.11%, TECk down 4.43%, CD down 1.78%, CG down 1.45% and Auto down 1.15% were top losers on the BSE sectoral space. 

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.

The S&P CNX Nifty touched a high and low 5,261.75 and 5,217.70 respectively.

The top gainers on the Nifty were JP Associates up 2.42%, ONGC up 1.46%, Hero MotoCorp up 1.41%, GAIL up 1.30% and BPCL up 1.20%. On the flipside, Infosys down 8.54%, Wipro down 4.07%, Bharti Airtel down 2.99%, IDFC down 2.71% and PNB down 2.58% were the top losers on the index. 

The European markets were trading in red, as France's CAC 40 down 0.62%, Germany's DAX up 1.18% and United Kingdom’s FTSE 100 down 1.21%.

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.