Markets spurt to intra-day’s high; cautious start of European counterparts to weigh

After dipping in a knee-jerk reaction to the flat factory output July figures, markets have now recuperated substantial ground to trade near intra-day high level as investors turn their focus towards Germany where a court, later today, is due to rule on the constitutionality of Berlin taking part in the European Stability Mechanism (ESM) rescue fund to support debt-plagued euro-zone countries.  Emergence of buying at dip combined amidst jaunty regional counterparts have mainly protracted the gains of Indian equity markets, which by now appear on the way of clocking sixth consecutive session of gains.  However, cautious start of European counterparts could temper some gains of the market, going further in the session.

At this point of time, 30 share index, Sensex, on BSE, adding close to century of points is trading comfortably above the psychological 17950 mark. Similarly, the widely followed index, Nifty, on NSE is trading above the 5400 crucial mark. Meanwhile, the broader indices too are trading in fine fettle.

Closer home, Stocks from Information Technology (IT), Auto and Bankex counters, toppling the buying list on BSE sectoral front, have emerged as the “pillars of the strength” for the bourses. Much of the strength in Information Technology stocks is on account of weakness of Indian currency, as these firms derive lion share of revenue in dollar. While, the stocks from Power, Oil & Gas and Healthcare counters, languishing at the bottom, could be termed as the “pocket of weakness”.

Meanwhile, hopes of rate cut in RBI’s upcoming monetary policy review on September 17, 2012, is doing good to the rate sensitive’s Auto and Banking counters. However, good news could be in offing of the top selling power counter as indications of UP electricity regulatory commission (UPERC) are anything to go by then there won't be any increase in power tariff for domestic consumers in the current financial year. The overall market breadth on BSE is largely in the favour of advances which have thumped declines in the ratio of 1482:1087, while 107 shares remained unchanged.

The BSE Sensex is currently trading at 17,952.91, up by 99.96 points or 0.56% after touching a high of 17,954.04 and low of 17,891.02. There were 18 stocks advancing against 11 declines while one stock remained unchanged on the index.

The broader indices continue to trade in fine fettle; the BSE Mid cap index was up by 0.52% and Small cap index was up by 0.61%.

The top gaining sectoral indices on the BSE were, IT up by 1.27%, TECk up by 1.00%, Auto up by 0.96%, Bankex up by 0.67% and CD up by 0.64%. While, Power down by 0.94%, Oil & Gas down by 0.02% and Health Care down by 0.01% were top losers on the index.

The top gainers on the Sensex were Tata Motors up by 3.45%, Coal India up by 2.41%, TCS up by 2.03%, Wipro up by 1.85% and Dr Reddys Lab up by 1.67%.

On the flip side, Jindal Steel down by 2.79%, BHEL down by 2.71%, Cipla down by 1.78%, Gail India down by 1.45% and Hero MotoCorp down by 1.08% were top losers on the Sensex.

Meanwhile, continuing to put forth dismal performance, India’s index of industrial production (IIP), a key measure of industrial output registered a negligible growth of 0.1 per cent in July 2012 at 167.3, way lower than growth rate of 3.7 percent in the corresponding period last year and also below the consensus estimates of 0.51 percent. The index contracted by a shocking 1.8 per cent in June 2012 after a very weak 0.1 percent growth in April. Meanwhile, the cumulative growth for the period April-July 2012-13 over the corresponding period of the previous year stood at (-) 0.1 per cent.

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 also contraction in the manufacturing output contributed to the lower than expected July industrial production figure, as manufacturing, which constitutes about 75.53 percent of industrial production, registered a negative growth of 0.2 percent in the month of July versus a growth of 3.1 percent in July. Nevertheless, even contraction in the mining sector, which constitutes about 14.6 percent of industrial production, which shrank by 0.7% versus a growth of 0.7 percent in July, weighed on the index. Additionally, growth in electricity sector also dropped to 2.8 percent versus a growth figure of 13.1 percent in June. The cumulative growth in the three sectors during April-July 2012-13 over the corresponding period of 2011-12 has been (-) 0.9 percent, (-) 0.6 percent and 5.5 percent respectively.

However, Capital goods output, a key investment indicator, clearly emerged as significant driver in terms of taking the growth in negative territory, as capital goods production, shrank by 5 percent on y-o-y basis, highlighting that companies are still wary of making investments in high-interest and uncertain economic climate. Consumer goods, on the other hand, grew at 0.7%, driven by robust growth of 1.4 percent and 0.1 per cent in consumer durables and non consumer-durables, respectively.

Industrial output, which accounts for a little over 15 percent of gross domestic product (GDP), highlights continuing weakness for the economy, which languished near a three-year low of 5.5 percent annually in the three months to June. However, this dreary factory output numbers may provide some policy direction to India’s most aggressive central bank, which furthering its fight against inflation, has maintained a status quo stance in the past two policy meetings.

The S&P CNX Nifty is currently trading at 5417.55, up by 27.55 points or 0.51% after trading in a range of 5418.80 and 5,401.70. There were 30 stocks advancing against 20 declines on the index.

The top gainers of the Nifty were Tata Motors up by 3.26%, Coal India up by 2.18%, Wipro up by 1.96%, TCS up by 1.89% and Asian Paints up by 1.82%.

On the flip side, Jindal Steel down by 2.74%, Siemens down by 2.64%, BHEL down by 2.44%, Cipla down by 1.68% and Reliance Infra down by 1.57% were the major losers on the index.

Most of the Asian indices were trading in green; Nikkei 225 spurted 1.73%, KLSE Composite rose 0.02%, Kospi Composite Index surged 1.56%, Strait Times added 0.42%, Hang Seng index amassed gains of 1.13% and Taiwan waited advnaced 1.14%, Shanghai Composite jumped by 0.23% and lastly, Jakarta Composite was trading in green with positive bias.

European markets have started on cautious note ahead of German Court’s Ruling, with CAC 40 trading lower by 0.11%,DAX trading higher by 0.04% and FTSE100 trading in red with 0.20% loss.