Benchmarks hit 4-week low; Q1 GDP proves non-event

Key Indian benchmarks started the new F&O series on a soft note hitting 4-week low as Gross Domestic Product (GDP) for the April-June quarter failed to impress the market-men. The market, after a soft start, saw some recovery post first quarter GDP announcement as the numbers remained slightly better-than-expected at 5.5 percent against the street expectation of 5.3 percent, after eight successive quarters of declining growth. The manufacturing sector grew an annual 0.2 percent during the quarter, while farm output rose 2.9 percent. But, the recovery proved short lived as investors turned cautious as services sector growth continued to slide, and the gross capital formation and private consumption numbers too remained muted.

The major annihilation in the markets came in the noon trade led by sharp fall in Power and infrastructure sectors amid long political impasse in Parliament over the issue of coal block allocation, which made investors, believe that no major reform could be in store during the monsoon session of Parliament. Also worries, that the impact of deficient rainfall will reflect in the second quarter numbers and increased inflation will further delay in any rate cuts, hampered the sentiments.

The selling got intensified after metal shares tumbled on concerns that demand would slowdown after China’s factory output rose to its slowest rate in eight months in July. China is the world’s largest metal consumer. Adding fuel to the fire, stocks from Auto sector got hammered on concerns that August sales growth would continue to remain subdued and demand would further slowdown on account of high interest rates on auto loans and rising fuel prices. Capital goods shares also witnessed selling pressure as manufacturing segment witnessed dismal growth during the Apr-Jun quarter. During the quarter ended June 30, the manufacturing sector grew marginally by 0.2 percent, against 7.3 percent growth in the same period of 2011-12.

Globally, stock markets were mixed on Friday as investors waited for a speech by Fed Chairman Ben Bernanke, hoping for possible signs of new US stimulus. Asian markets snapped the session on mixed note though, Japanese Nikkei average fell to a four-week closing low today as resources-related shares remained under pressure on concern over slowing China growth. However, European stocks, after opening on cautious note, pared early losses and turned positive in the morning trade, halting a sharp three-day retreat, led by gains in Italy’s blue-chip index.

Back home, some pressure also came in from software front as stocks like TCS, Wipro and Infosys edged lower ahead of US Fed Chairman Ben Bernanke's address to the annual Jackson Hole meeting of central bankers later today. Moreover, the sentiments also dampened after PSU oil marketing companies like BPCL, HPCL and IOC all edged lower on buzz that diesel and LPG prices are not likely to be hiked even after the end of the monsoon session of Parliament.

The NSE’s 50-share broadly followed index Nifty, declined by about sixty points but manage to end above the psychological 5,250 support level while Bombay Stock Exchange’s Sensitive Index - Sensex moved down by over one hundred and sixty points to finish below the psychological 17,400 mark. However, the broader markets too struggled to get some traction but, ended the session with slender gains.

The markets rose on overall volumes of over Rs 1.30 lakh crore while the turnover for NSE F&O segment remained on the lower side as compared to that on Thursday at over Rs 0.80 lakh crore. Moreover, the market breadth remained in favor of declines as there were 1,380 shares on the gaining side against 1,419 shares on the losing side while 131 shares remain unchanged.

The BSE Sensex shaved off 160.89 points or 0.92% to settle at 17,380.75, while the S&P CNX Nifty plunged by 56.55 points or 1.06% to close at 5,258.50.

The BSE Sensex touched a high and a low of 17,557.62 and 17,337.61 respectively. However, the BSE Mid cap index was up by 0.05% and Small cap index up by 0.07%.

Cipla up by 1.64%, HDFC up by 1.31%, Bharti Airtel up by 1.22%, SBI up by 0.26% and ONGC up by 0.16% were top gainers on the Sensex, while Hindalco down by 2.21%, Coal India down by 2.15%, BHEL down by 2.10%, Hero MotoCorp down by 2.02% and Sterlite Industries down by 1.99% were top losers on the index.

The only gainer on the BSE sectoral space was, Health Care up by 0.01%, while Metal down 1.39%, Power down 1.33%, Oil & Gas down 1.31%, Realty down 1.27% and Auto down 1.23% were major losers on the BSE sectoral space.  

Meanwhile, driven by higher-than-expected performance on the agriculture front, Indian economy grew 5.5 per cent in first quarter this fiscal, higher than 5.3 per cent GDP number recorded in the previous quarter of fiscal 2012. The growth figure, which is better than consensus estimates of 5.2 per cent, is sharply lower from the robust 8 per cent growth in the same quarter of the last financial year.

As per official data released by the Central Statistics Organization (CSO), quarterly GDP at factor cost at constant (2004-2005) prices for Q1 of 2012-13 is estimated to be at Rs 1306,276 crore, as against Rs 12,38,738 crore in Q1 of 2011-12. Meanwhile, GDP at factor cost at current prices in Q1 of 2012-13, is estimated at Rs 2178778 crore, as against Rs 19,19,286 crore in Q1, 2011-12, showing an increase of 13.5 per cent.

Agriculture emerged as the only saving grace for the sagging economy, which has witnessed a near-stalling of industrial activity. Agriculture came in at better than expected at 2.9 per cent, as against major economists’ estimates at 2 percent. According to the government’s press release, the economic activities which registered significant growth in April-June of 2012-13 on year on year basis are construction at 10.9 percent, financing, insurance, real estate and business services at 10.8 percent and community, social and personal services at 7.9 percent.

On the flip side, services sector was the biggest disappointment, which grew at 6.9 per cent against 10.2 per cent in the year ago period. While, manufacturing saw tepid growth of 0.2 per cent for the quarter under review as against a contraction of 0.3 per cent in the previous quarter. Additionally, mining sector of the economy grew at 0.1 per cent versus 4.3 per cent quarter-on-quarter.

Meanwhile, the gross fixed capital formation (GFCF), a measure of investments, at current and constant (2004-05) prices during 2012-13 are estimated at 29.9 per cent and 32.8 per cent, respectively, as against the corresponding rates of 31.2 per cent and 33.9 per cent, respectively in Q1 of 2011-12. In terms of GDP at market prices, the rates of Private Final Consumption Expenditure (PFCE) at current and constant (2004-05) prices during Q1 of 2012-13 are estimated at 11.7 per cent and 11.1 per cent, respectively, as against the corresponding rate of 11.0 per cent and 10.6 per cent, respectively in Q1 of 2011-12.

However, this slight improvement in GDP growth for the June quarter may prompt the Reserve Bank of India to stand still at its upcoming monetary policy review meet on September 17, as the central bank has reiterated that the government’s fiscal policy action should precede any rate cut move. Further, the central bank also previously stated that investments, the fuel needed to put the economy back in the 8% trajectory, may not revive for more than a year even with lower interest rates, in light of adverse consumption and savings behaviour of individuals and companies.

The S&P CNX Nifty touched a high and low of 5,303.25 and 5,238.90 respectively.

The top gainers on the Nifty were Bharti Airtel up by 1.50%, Cipla up by 1.13%, SAIL up by 0.83%, HDFC up by 0.66% and Ranbaxy up by 0.64%. On the flip side, Hero MotoCorp down by 3.88%, BPCL down by 3.74%, Kotak Bank down by 3.27%, IDFC down by 3.00 and BHEL down by 2.92% were the major losers.

The European markets were trading in green, France's CAC 40 up by 1.39%, Germany's DAX was up by 0.78% and United Kingdom’s FTSE 100 was up by 0.35%.

Asian markets ended mixed on Friday after Wall Street declined on pessimism about fuel prices and stagnant job growth, ahead of speech by Fed Chairman Ben Bernanke hoping for possible signs of new U.S. stimulus.  Hong Kong shares ended lower on a third consecutive day on Friday, sinking deeper into the red in August, after first half corporate earnings disappointed with little prospect of imminent recovery. Japan's Nikkei average fell to a four-week low as Japanese manufacturing activity contracted in August to the lowest level in 16 months.

KLSE Composite was closed today on account of Merdeka day holiday.