Post session - Quick review

Brushing aside flattish July month’s factory output figures, markets made the most out of Germany court’s favorable verdict on EU bailout fund‎, which bolstered across the globe appetite for risky assets such as equities. Germany's Constitutional Court, in a much anticipated move, gave a green light for the country to ratify the euro zone's new rescue fund and budget pact but the same time gave parliament veto powers over any future increases in the size of the fund. 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.

Besides this, reports of potential airline measure, which helped cement expectations for further government reforms, also turbo-charged the markets, which showcased their best performance in last six months. 30 share index of Bombay Stock Exchange (BSE), Sensex, added over century of points, to shut shop above the psychological 18,000 mark, highest since March 14. Meanwhile, widely followed index of National Stock Exchange (NSE), Nifty, added close to 3/4 percent to end above the crucial 5400 mark. Additionally, the broader indices too accumulated gains, but in lesser proportion than the frontline indices. Trade of over 1.04 lac core was done in terms of volume turnover. On the global front, Asian shares ended jaunty on the optimism that German court would approve the legality of the euro zone's bailout fund later in the day and the US Federal Reserve may deliver further stimulus measures this week.  Additionally, with no surprises, Germany court’s favorable verdict on EU bailout fund, led to smart gains in European markets’ early deals. Meanwhile, Federal Reserve's policy meeting, which will begin today for two days, will also be closely watched by investors as the expectations have been mounted over economic stimulus after the disappointing employment data.

Closer home, besides tracing the development at global front, investor’s would be awaiting the release of August month’s inflation data, for further cues on RBI’s stance in its upcoming monetary policy review. Consensus estimate is that India's rate of inflation probably picked up in August to 6.95 per cent year-on-year in August, from July's three-year low figure of 6.87 per cent, on account of poor summer rains which probably drove up food prices.

Meanwhile, in sector specific action, Airline shares extended gains after India's aviation minister averred that he's hopeful of government allowing foreign direct investment into the sector and after talking to most of the ruling coalition's political allies. Flying high on this development were SpiceJet, Kingfisher Airlines, Jet Airways, which rallied in the range of 5-7 percent. Although 11 out of 13 sectoral indices were on investor’s buying list, stocks from Metal, Auto and Capital Goods counters were the outperformers. A bout of strength was witnessed in interest rate sensitive’s counter’s, i.e. Realty, Auto and Bankex after flat growth of industrial output in July 2012 strengthened the case for the central bank to mull cutting policy rates in its upcoming policy review on September 17, 2012 in order to help revive growth. On the flip side, Power, Healthcare and Public Sector Undertaking counters emerged as the only weak-links of the trade. The market breadth on the BSE ended positive; advances and declining stocks were in a ratio of 1555:1315 while 136 scrips remained unchanged. (Provisional)

The BSE Sensex gained 158.29 points or 0.89% and settled at 18,011.24. The index touched a high and a low of 18,012.89 and 17,884.96 respectively. 21 stocks were seen advancing while 9 stocks were declining on the index (Provisional)

The BSE Mid-cap index was up 0.40% while Small-cap index was up 0.44%. (Provisional)

On the BSE Sectoral front, Metal was up 2.15%, Capital Goods was up 1.50%, Auto up 1.38%, IT up 0.90% and TECk up by 0.76% were the top gainers, while Power down 0.99% and Health Care down 0.44% were the only losers in the space.

The top gainers on the Sensex were Tata Motors up 4.83%, L&T up 3.41%, Jindal Steel up by 3.22%, Tata Steel up 2.91% and Coal India up 2.72% while, Cipla down by 2.95%, NTPC down by 1.78%, BHEL down by 1.59%, Hero MotoCorp down by 0.96% and Gail India down by 0.80% were the top losers in the index. (Provisional)

Meanwhile, 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.

India VIX, a gauge for markets short term expectation of volatility lost 2.21% at 15.04 from its previous close of 15.38 on Tuesday. (Provisional)

The S&P CNX Nifty gained 42.80 points or 0.79% to settle at 5,432.80. The index touched high and low of 5,435.55 and 5,393.95 respectively. 36 stocks advanced against 14 declining ones on the index. (Provisional)

The top gainers on the Nifty were Tata Motors was up 5.08%, L&T up 3.60%, Jindal Steel up 3.43%, Tata Steel up 2.90% and SAIL was up 2.80%. On the other hand, Siemens down 2.90%, Cipla down by 2.76%, NTPC down by 2.04%, BHEL down 1.82% and Reliance Infrastructure down 1.39% were the only losers. (Provisional)

The European markets were trading in green with, France’s CAC 40 up 0.71%, Germany’s DAX up 0.93% and the United Kingdom’s FTSE 100 up 0.27%. 

Asian stock markets ended broadly higher on Wednesday ahead of the U.S. Federal Reserve's policy meeting later today and German Constitutional Court ruling.  Investors remained bullish since the start of trade and optimism was sustained in the entire session. Japan's Nikkei share rallied, as better-than-expected core machinery orders data for July outweighed the yen's continued strength against the dollar. With sustained buying in blue chip stocks, the BSE benchmark Sensex surpassed the psychological 18,000 mark. Hang Seng index ended firm, extending gains for a fifth consecutive session, lifted by commodity stocks and property developers, however KLSE Composite edged down marginally.