Sensex loses further ground; Capital Goods witness nasty laceration

After slipping in a knee jerk reaction to shocking September month’s IIP figure, benchmark equity indices have furthered lost some ground due to relentless profit-booking in Oil & Gas, Metal and Capital Goods counters. Downbeat economic indicators that are pointing out that the economy is not out of the woods yet are mainly keeping the mood cautious at D-street. Along with the release of gloomy September IIP data, India’s CPI-inflation marginally rose to 9.75% in October as compared to 9.73 percent for the previous month. Much of the disappointment crept in after India's exports in October contracted 1.63% year-on-year, for the sixth month in a row, to $23.2 billion, mainly due to the demand slowdown in the US and European markets. This subdued trade deficit data, which pushed Rupee to a two week low, mainly got the Information Technology stocks on buyer’s radar, as IT firms derive significant share of their revenue in foreign currency, mostly American dollar. On the flip side, Capital goods shares tumbled after the latest IIP data showed that capital goods production slumped 12.2% in September 2012 from a year earlier, compared with a 3.4% decline in August 2012. Nevertheless the losses of the bourses remained limited ahead on festive mood, 30 share index, Sensex, was trading a bit above the 18650 level with a loss of quarter points, while 50 share index, Nifty was trading near its neutral line, which was sub 5700 level. Broader indices, outperforming the frontline equity indices, kept their heads above the water.

Meanwhile, feeble global cues too added to the negatives. Asian shares’ gains were capped on Monday as investors' concerns about the fiscal crisis in the United States and Greece's bailout programme dented optimism over the growth prospects of the world's two largest economies, the United States and China. Adding to the uncertainty, Japan reported that its economy shrank 0.9 percent in July-September from the previous quarter, the first contraction in three quarters, suggesting faltering global demand and weak consumer spending may push the world's third-largest economy into a mild recession.

The BSE Sensex is currently trading at 18658.22 down by 25.46 points or 0.14% after trading in a range of 18750.92 and 18628.53. There were 8 stocks advancing against 21 declines and one remained unchanged on the index. The overall market breadth on BSE is in the favour of declines which have thumped advances in the ratio of 1323: 1173, while 115 shares remained unchanged.

The broader indices continued to keep their head above the water; the BSE Mid cap and Small cap indices were trading higher by 0.29% and 0.20% respectively.

The top gaining sectoral indices on the BSE were CD up by 0.82%, Bankex up by 0.74%, FMCG up by 0.48%, IT up by 0.40% and TECk up by 0.36%. While, Oil &Gas down 0.77%, Metal down by 0.74%, CG down by 0.50%, Auto down 0.31% and Realty down by 0.15% were top losers on the index.

The top gainers on the Sensex were Bharti Airtel up by 1.16%, HDFC Bank up by 0.77%, TCS up by 0.59%, SBI up by 0.49% and Infosys up by 0.32%.

On the flip side, Tata Steel down by 1.97%, Tata Power down by 1.43%, Hero MotoCorp down by 1.08%, RIL down by 1.03% and Gail India down by 0.98% were the top losers on the Sensex.

Meanwhile, in signs that the economy is not out of woods, India’s index of industrial production (IIP), a key measure of industrial output witnessed contraction of 0.4 per cent in August 2012 at 163.6, way below the consensus estimates of 3 percent growth figure. Further, the number was below than August month’s growth figure of 2.7 per cent, which was later revised to 2.3 per cent. Meanwhile, the cumulative growth for the period April-September 2012-13 over the corresponding period of the previous year stands at 0.1 per cent.

The industrial output mostly has 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. After taking a breather in the previous month, the manufacturing sector, which constitutes about 75.53 percent of industrial production, resumed its southbound journey, by witnessing contraction of 1.5 per cent for the month under review as against growth of 2.9 per cent in August.

However, mining sector, which constitutes about 14.6 percent of industrial production, grew at 5.5 per cent as against growth of 2 per cent in August. Further, growth in electricity sector too rose to 3.9 percent versus a 1.9 percent in the previous month. The cumulative growth in the three sectors during April-September 2012-13 over the corresponding period of 2011-12 has been 0.0 per cent, (-) 0.4 per cent and 4.6 per cent respectively.

Capital goods output, a key investment indicator, clearly continued to be a disappointment as capital goods production witnessed a massive decline of  12.2 percent on y-o-y basis highlighting that companies are wary of making investments in high-interest and uncertain economic climate. Consumer goods, on the other hand, witnessed contraction 0.3 per cent, driven by decline of 1.7 percent in consumer durables. Meanwhile, non consumer-durables, registered 1.1 percent growth.

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, the country has a long way to go before its springs back to the stellar growth rates of the past, after having slipped since February into a phase called stagnation that has become worst since the depths of a global crisis three years ago.

The S&P CNX Nifty is currently trading at 5,683.55, down by 2.70 points or 0.05% after trading in a range of 5,718.90 and 5,673.30. There were 22 stocks advancing against 26 declines while 2 stocks remains unchanged on the index.

The top gainers of the Nifty were IDFC up by 1.98%, JP Associates up by 1.48%, Axis Bank up by 1.13%, HDFC Bank up by 1.10% and Bharti Airtel up by 1.00%.

On the flip side, DLF down by 2.11%, Tata Steel down by 1.98%, Ranbaxy down by 1.21%, Tata Power down by 1.14% and Siemens down by 1.04%, were the major losers on the index.

Most of the Asian equity indices were trading in the red, barring, Shanghai Composite, Straits Times and Hang Seng which were trading higher by 0.20%, 0.08% and 0.17% respectively. While Kospi Composite down by 0.19%, Jakarta Composite declined by 0.36%, KLSE Composite down by 0.11%, Nikkei 225 plunged 0.93% Taiwan Weighted slid 0.35%.