Benchmarks pare losses; trade continues on a weak note

Indian equity indices pared off some losses and continued its weak trade in absence of buying from investors. Investors gave a muted response to the pleasantly surprisingly June IIP numbers which surged by 8.8% in June as compared to a nine-month low of 5.6% in May. The sharply higher reading failed in enthusing domestic investors as expectations are rife that the RBI will continue tightening policy in coming months until inflation peaks, despite increasing uncertainty over a global economic slowdown and an extended period of easy policy in the developed world. Market participant were seen selling in IT, TECk and Bankex sector. Stocks like Bata India, Chambal Fertilizers, Supreme Industries, Gujarat Gas, Aanjaneya Lifecare and Essar India hit new high while stocks like Prithvi Info, Cambridge Technologies, Refex Refrigerants, Vascon Engineers, Persistent Systems and VMS Industries hit new low. Shares of Capital Goods Company like BGR Energy, Alstom Projects, Lakshmi Machine Works, Crompton Greaves, Punj Lloyd, Larsen & Toubro, Usha Martin, Bharat Electronics, BEML and Havells India were trading firm after the latest data showed that capital goods production jumped 37.7% in June 2011 over June 2010. Today’s newly listed L&T Finance Holdings, a subsidiary of engineering and construction major Larsen and Toubro is also seen trading firm. Jubilant FoodWorks that operates Dominos Pizza chain in India is trading on high note on the bourses after announcing better results. Its first quarter net profit increased 51.57% at Rs.23.16 crore, up from Rs.15.28 crore in the same period of 2010-11. Heavy activity was seen in counters of Sterling Biotech, Prestige Estate Projects and IndusInd Bank with good volumes due to fund based activity as of yesterday. Albula Investment Fund bought 1,500,000 shares of Sterling Biotech. Swiss Finance Corporation (Mauritius) sold 1,851,690 shares of Prestige Estates Projects. Cliffrose Investment sold 6,606,190 shares of DB Corp. However, Reliance Life Insurance Company bought 2,000,000 shares of DB Corp. General Atlantic Service Company bought 4,500,000 shares of IndusInd Bank while Lotus Global Investment sold 4,500,000 shares of IndusInd Bank. On the global front, Asian markets were trading in mix while the European markets were trading in green on optimistic note. Back home, the NSE Nifty and BSE Sensex were trading below their psychological 5,100 and 16,900 levels, respectively. The market breadth on the BSE was negative in the ratio of 1257:1425 while, 127 scrips remained unchanged.

The BSE Sensex is currently trading at 16,850.07 down by 209.33 points or 1.23% after trading as high as 17,246.88 and as low as 16,784.56. There were 9 stocks advancing against 21 declines on the index.

The broader indices were trading on a weak note; the BSE Mid cap index slipped 0.22% while Small cap lost 0.10% respectively. 

On the BSE sectoral space there were no gainers while IT down 2.91%, TECk down 2.35%, Bankex down 1.58%, Realty down 1.01% and Power down 0.76% were the major loser on the index.

Hero Moto up 2.34%, Jindal Steel up 2.04%, M&M up 1.59%, ONGC up 0.97%  and Maruti Suzuki up 0.30% were major gainers on the Sensex, while Tata Motors down by 5.24%, TCS down 3.51%, Hindalco down 3.31%, SBI down 3.25% and Infosys down 3.24% were the major losers on the index.

Meanwhile, the industrial growth for the month of June has allied the fear of slowdown in the industrial output. India’s industrial production measured by the Index of Industrial Production (IIP) shows growth of 8.8% in June 2011 as compared to 7.4% in June 2010. This increase in growth of the IIP is due to increase in manufacturing and electricity sector which grew by 10% and 7.9% respectively, however, the mining segment of IIP saw moderation in growth, it grew by 0.6% in June 2011 from 6.9% in corresponding month of last fiscal. However, the industrial production from April to June 2011 stood at 6.8% which is less than the same period of corresponding period. This fall in growth on Q-on-Q basis is due to decline in mining and manufacturing which stood 1% and 7.5% respectively during the said period. However, electricity sector surged during the same period to 8.2%.

According to data released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation, the General Index for the month of June 2011 stood at 170.3, which is 8.8% higher on year-on-year basis. The cumulative growth for the period April-June 2011-12 stands at 6.8% over the corresponding period of the previous year.

The IIP for the Mining, Manufacturing and Electricity sectors for the month of June 2011 stand at 126.0, 182.1 and 144.3 respectively, with the corresponding growth rates of 0.6%, 10.0% and 7.9% as compared to June 2010. The cumulative growth in the three sectors during April-June, 2011-12 over the corresponding period of 2010-11 have been 1.0%, 7.5% and 8.2% respectively, which moved the overall growth in the General Index to 6.8%.

During June 2011, in terms of industries 15 out of 22 industry groups in the manufacturing sector have shown positive growth in June 2011 from June 2010. The industry group ‘Electrical machinery and apparatus n.e.c.’ has shown the highest growth of 88.9%, followed by 19.1% in ‘Office, accounting and computing machinery’ and 18.6% in ‘Other transport equipment’. On the other hand, the industry group ‘Medical, precision and optical instruments, watches and clocks’ has shown a negative growth of 10.3% followed by 10.1% in ‘Radio, TV and communication equipment and apparatus’.

As per Use-based classification the growth rates in June 2011 as compared to the corresponding month of the previous year are 7.5% in Basic goods, 37.7% in Capital goods and 1.9% in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of 1.0% and 2.1% respectively, with the overall growth in Consumer goods being 1.6%. Some of the important items of capital goods showing high growth during the current month include ‘Cable, Rubber Insulated’ (232.4%), ‘Printing Machinery’ (81.1%), ‘Rubber Transmission and V Belts’ (57.0%), ‘Packaging Machinery’ (48.5%), ‘Textile Machinery’ (47.9%), ‘X-ray equipment’ (33.1%) and ‘Industrial Chains’ (32.0%).

The other important items showing highly positive growth during the month are: ‘Sugar’ (246.9%), ‘Molasses’ (179.5%), ‘Viscose staple fibre’ (72.9%), ‘Stainless/ alloy steel’ (72.4%), ‘GP/GC sheets’ (54.1%), ‘Tanned or Chrome Skins and Leathers’ (53.6%), ‘sponge iron’ (38.0%), ‘CR Sheets’ (33.4%) and ‘Indust. Alcohol (Rectified/Denatured Spirit)’ (31.0%).

The industrial production for the month of June 2011 is higher than May 2011 and June 2010 indicating that industrial activities have increased. However, the first quarter data are not so encouraging; the April to June 2011 IIP growth stood at 6.8% as compared to 9.6% during same period of previous fiscal. Almost 3% fall in industrial production is due to elevated inflation and RBI’s nonstop increase in its key policy rates. Since March 2010, RBI has increased its key policy rates by the 11 times, and it is further expected to increase it on the backdrop of recent development in international economy.

The downgrading of US government sovereign credit rating by the leading rating agency Standard and Poor’s and debt crisis in European nations, are putting pressures on the capital inflow and the external trade of the government.

The S&P CNX Nifty is currently trading at 5,078.00, lower by 60.30 points or 1.17% after trading as high as 5,194.45 and as low as 5,053.35. There were 13 stocks advancing against 37 declines on the index.

The top gainers of the Nifty were Hero MotoCorp up by 2.39%, Jindal Steel up 2.09%, GAIL up 1.77%, M&M up 1.43% and Cairn up 1.41%.

Tata Motors down 5.77%, Hindalco down 3.72%, TCS down 3.68%, Infosys down 3.30% and Tata Power down 3.01% were the major losers on the index.

Asian markets traded on a mixed note, Shanghai Composite advanced 0.45%, Hang Seng climbed 0.13%, Jakarta Composite rose 0.30%, KLSE Composite amassed 0.49% and Straits Times added 1.19%

On the other hand, Nikkei 225 declined 0.20%, Seoul Composite plunged 1.33% and Taiwan Weighted sank 1.06%.

The European markets were trading in green with, France’s CAC 40 up 0.88%, Germany's DAX gained 1.40% and London’s FTSE jumped 0.85%.