Benchmarks snap choppy session almost unchanged after weaker IIP data

After two days of continuous downfall, Indian benchmark equity indices consolidated their position around the previous closing levels on Monday. The psychological 5,700 (Nifty) and 18,700 (Sensex) levels proved as stern resistances as the key gauges failed to surmount those levels by the end. The key gauges displayed listless performance through the day as the aimless benchmarks appeared exhausted and showed only sideways kind of movement in a tight band as September factory output data dampened investors’ sentiment. India’s index of industrial production (IIP), a key measure of industrial output witnessed contraction of 0.4 percent in September 2012 at 163.6, way below the consensus estimates of 3 percent growth figure. The industrial output mostly remained fragile in the previous few months, with an exception being August, as growth in all three sectors viz. mining, manufacturing and electricity got dampened.

India’s Consumer Price Index (CPI) too failed to cheer traders’ sentiment as provisional annual inflation rate based on all India general CPI (Combined) for October 2012 on point to point basis stood at 9.75 percent as compared to 9.73 percent for the previous month of September 2012. After the disappointing industrial production data, investors have now turned their focus towards the monthly WPI inflation data for October which is likely to accelerate, since some level of pass-through of the recent fuel price hike will be seen. The sentiments also got butchered after Indian rupee fell to its lowest in nearly two months at 55.12 after data showed that a record trade deficit and a contraction in factory output stoked fears about economic growth at a time of continued high inflation.

Domestic markets got off to a quiet start as sentiments across global space remained uninspiring. Markets across the Asian region exhibited sluggish trend after Japan’s economy shrank at the fastest pace since last year’s earthquake; a report showed gross domestic product shrank an annualized 3.5 percent in the three months through September. However, Chinese market was marginally in green as overseas shipments increased 11.6 percent from a year earlier. Imports rose 2.4 percent, the same pace as the previous month. Moreover, European counters were trading mixed ahead of a meeting of euro-zone finance ministers in Brussels later in the day. Greece's bailout is likely to be the top of the agenda in Brussels.

Back home, some amount of pressure also came in after the relentless decline in Indian exports extended to the sixth month in a row, dropping 1.63 percent in October 2012 due to persistent economic turmoil in the US and European markets. Meanwhile, metal stocks like Bhushan Steel, Sail, Hindalco Industries, Jindal Steel & Power and Hindustan Zinc all edged lower as LMEX, a gauge of six metals traded on the London Metal Exchange dropped 0.86% on November 9, 2012. However, losses remain capped as investors continued to show buying interests in Consumer Durables counter, which surged over a percent led by Gitanjali Gems, Rajesh Exports and Titan Industries. The rate sensitive banking and realty too found takers in the session as they closed with notable gains of around a percent.

The NSE’s 50-share broadly followed index Nifty declined marginally by two points to end below its psychological 5,700 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex dropped by over ten points to finish below the psychological 18,700 mark. However, broader markets outperformed benchmarks and snapped the session with a gain over quarter a percent. The market breadth remained in favor of declines as there were 1,334 shares on the gaining side against 1,461 shares on the losing side while 124 shares remain unchanged.

Finally, the BSE Sensex lost 13.34 points or 0.07% to settle at 18,670.34, while the S&P CNX Nifty declined by 2.55 points or 0.04% to end at 5,683.70.

The BSE Sensex touched a high and a low of 18,750.92 and 18,607.66, respectively. The BSE Mid-cap index was up by 0.32% and Small-cap index was up by 0.20%.

HDFC Bank up 1.85%, Bharti Airtel up 1.63%, SBI up 1.59%, TCS up 0.66% and Infosys up 0.48% were the major gainers on the Sensex. On the flip side, Tata Steel down 1.72%, Hero MotoCorp down 1.67%, ITC down 1.56%, Tata Power down 1.43% and Jindal Steel down 0.95% were the major losers on the index.

The major gainers on the BSE sectoral space were, Consumer Durables (CD) up 1.13%, Bankex up 0.94%, Realty up 0.87%, TECk up 0.57% and IT up 0.54%, while Metal down 0.70%, Capital Goods (CG) down 0.67%, Oil & Gas down 0.36%, Auto down 0.34% and Power down 0.23% were major losers on the BSE sectoral space.

Meanwhile, to enable participation of long-term and stable class of investors in the corporate bond market, the Finance Ministry is planning to relax investment guidelines for pension, provident funds and insurance companies. An indication to this effect was given by Economic Affairs Secretary Arvind Mayaram at the India Infrastructure Investment Forum on Nov 9.

The legal amendments are required to strengthen the regulation for corporate debt. Currently, pension funds are required to keep 55 per cent of their debt investments in Central and State Government securities. The insurance companies were not allowed to hold over 10 per cent of the equity of investee company. Also, at least three-fourths of their debt portfolio should be invested in triple-A rated bonds.

Moreover, finance ministry is looking at amendments to the rules formulated by the Corporate Affairs Ministry, income tax law and SARFAESI law and for removal of legal and regulatory constraints for introduction of new products such as covered bonds, municipal bonds and credit defaults swaps. However, a lot of sovereign wealth funds and foreign pension funds had evinced interest in infrastructure debt funds, Mayaram added.

The S&P CNX Nifty touched a high and a low of 5,718.90 and 5,665.75 respectively.

The top gainers on the Nifty were IDFC up 3.31%, HDFC Bank up 2.15%, JP Associates up 2.03%, Bharti Airtel up 1.69% and SBI up 1.57%.

The top losers on the index were DLF down 2.68%, Ranbaxy down 2.16%, Hero MotoCorp down 2.03%, BPCL down 2.01% and Siemens down 1.85%.

European markets were trading mixed. France’s CAC 40 down 0.19%, Germany’s DAX up 0.26% and Britain’s FTSE 100 up by 0.22%.

Asian markets ended mostly lower on Monday as market sentiments were weighed down by concerns over U.S. fiscal crisis along with Greece's bailout, which spoiled optimism over world’s largest economy’s growth prospects. However Hong Kong and mainland Chinese stock markets closed in positive territory following Chinese Cabinet officials’ comments that the country’s economic slowdown has ended, although the economy is not ready to stage a recovery, and that exporters still face tough conditions. Japan’s Nikkei touched four-week low as the exporting nation registered its worst September trade figures for 30 years as exports slumped.