Sensex surpasses 18,000 level to hit 6-mth high; Nifty crosses 5,400 mark

Indian equity markets snapped yet another session in the green territory with the frontline equity indices amassing about a percent gain and extending the gaining streak for sixth consecutive session. The Sensex surpassed 18,000 level while, Nifty crossed 5,400 mark for the first time since March 14, despite a disappointing report on industrial production for the month of July, as sentiments remained jubilant on hopes for fiscal reforms after the aviation minister expressed hopes that the government would allow foreign direct investment into the sector.

The gauges, throughout the session, exhibited strong traction, but trimmed some of its gains in mid noon trade on the back of disappointing July industrial output data. India’s industrial production barely moved in July, as weakness persisted in the critical areas of the economy such as manufacturing, mining and capital goods amid sticky inflation, high interest rates, fragile currency, global slowdown and policy paralysis. The combined output of factories, mines and power utilities, as measured by the IIP, inched up by a measly 0.1% in July 2012 as against expectations of a 0.5% growth. India’s industrial output was at 3.7% in July last year.

However, the domestic bourses regained their strength tracking a risk-on mood globally, after Germany’s top court backed the legality of the euro zone bailout funds, although with conditions. German court has allowed ratification of ESM under certain conditions and rejected complaint against ECB bond buys. The court said the country must ensure German liability does not exceed 190 billion euros. Meanwhile, Asian stock markets ended broadly higher on Wednesday ahead of the US Federal Reserve’s policy meeting later today.

Back home, investors 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 would probably pick up in August to 6.95 percent year-on-year in August, from July's three-year low figure of 6.87 percent, on account of poor summer rains, which probably drove up food prices.

Metal space too provided the front line indices a much needed support as stocks like Jindal Steel, Tata Steel, Sterlite and Hindalco recovered on short covering and value buying at lower levels after recent losses. Moreover, interest rate sensitive realty and auto stocks rose as almost flat growth of industrial output in July 2012 strengthened the case for the central bank to mull cutting policy rates in RBI’s policy review on September 17, 2012 in order to help revive growth. Sentiments were also aided by Aviation shares, which advanced on reports that the government is preparing measures to potentially allow foreign investment in the aviation sector. On the losing side, shares of power generation companies remained under pressure after the IIP of electricity sector reported 2.8% growth in July 2012 compared to 13.1% a year earlier.

The NSE’s 50-share broadly followed index Nifty, rose by over forty points to end comfortably over the psychological 5,400 support level, while Bombay Stock Exchange’s Sensitive Index - Sensex moved up by about one hundred and fifty points to finish above the psychological 18,000 mark. Moreover, the broader markets too traded in the positive terrain and ended the session with a gain of about half a percent.

The markets rose on overall volumes of over Rs 1.04 lakh crore, which remained on the lower side as compared to that on Tuesday. Moreover, the market breadth remained in favor of advances as there were 1,575 shares on the gaining side against 1,308 shares on the losing side while 123 shares remain unchanged.

The BSE Sensex gained 147.08 points or 0.82% to settle at 18,000.03, while the S&P CNX Nifty rose by 41.00 points or 0.76% to close at 5,431.00.

The BSE Sensex touched a high and a low of 18,012.89 and 17,884.96 respectively. However, the BSE Mid cap index was up by 0.41% and Small cap index up by 0.46%.

Tata Motors up by 5.29%, Jindal Steel up by 3.79%, Coal India up by 2.91%, L&T up by 2.84% and Tata Steel up by 2.68% were top gainers on the Sensex, while Cipla down 2.73%, NTPC down 2.18%, Gail India down 1.66%, BHEL down 1.64% and Hero MotoCorp down 0.92% were top losers on the index.

The major gainers on the BSE sectoral space were, Metal up 2.14%, Auto up 1.26%, Capital Goods (CG) up 1.20%, IT up 0.95% and Consumer Durables (CD) up 0.81%, while Power down 0.98% and Health Care (HC) down 0.43% were top losers on the BSE sectoral space.  

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 touched a high and low of 5,435.55 and 5,393.95 respectively.

The top gainers on the Nifty were Tata Motors up by 5.08%, L&T up by 3.60%, Jindal Steel up by 3.43%, Tata Steel up by 2.90% and SAIL up by 2.80%. On the flip side, Siemens down by 2.90%, Cipla down 2.76%, NTPC down 2.04%, BHEL down 1.82% and Reliance Infra down by 1.39% were top losers.

The European markets were trading in green, France's CAC 40 up by 0.52%, Germany's DAX was up by 0.82% and United Kingdom’s FTSE 100 was up by 0.12%.

Asian stock markets ended broadly higher on Wednesday ahead of the US 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.