Markets continue trading weak on weak IIP data

The Indian equity markets extended their early losses and are currently trading near low points of the day as weak IIP data has weighed heavily. Investors were on selling spree as industrial output data reflected weak growth due to sharp increases in interest rates and slowing spending. Meanwhile, inflation data for the week ending October 29 is showing slight moderation as primary article inflation stands at 11.43 versus 12.08%. Food article inflation stands at 11.81% versus 12.21% and fuel price inflation is at 14.5%, unchanged. On sectoral front all sector s were trading in red except FMCG. However major corporate giants reported weak results, Tata Steel, the world's No.7 steelmaker, fell as much as 4% after posting an 89% slump in quarterly profit and warned of weak demand worsening the next few quarters. DLF, real estate developer, too was in somber mood after the company reported an 11 percent fall in profit for the quarter to end-September. The stock shed more than 2%. On the global front most of the Asian markets were trading in green. Back home, the market breadth was favoring the negative trend; there were 732 shares on the gaining side against 1744 shares on the losing side while 90 shares remained unchanged.

The BSE Sensex after plunging 236.32 points or 1.36% is currently trading at 17,125.78. The index has touched a high and low of 17,279.23 and 17,096.84 respectively.  There were 9 stocks advancing against 21 declining ones on the index.

The broader indices too dived into the sea of red; the BSE Mid cap and Small cap index declined by 1.21% and 1.50% respectively. 

The only gaining sectoral indices on the BSE were, FMCG up by 0.26%. On the flip side, Bankex down by 2.60%, CG down by 2.36%, Metal down by 2.31%, Realty down by 2.25% and Power down by 1.44% were the top losers on the index.

The top gainers on the Sensex were Hero Motocorp up by 1.68%, Sun Pharma up by 1.60%, TCS up by 0.97%, Bajaj Auto up by 0.88% and Hindustan Unilever up by 0.87%.

On the flip side, Tata Steel down by 4.68%, ICICI Bank down by 4.44%, Hindalco down by 3.75%, L&T down by 2.94% and SBI down by 2.86% were the top losers on the index.

Meanwhile, the government is planning to increase the Foreign Direct Investment (FDI) limits in single-brand retail from 51% to 100%, in a move that is expected to encourage the single brand retailers such as furniture-maker Ikea and luxury brands such as Louis Vuitton to open shops in India.

As per the government official, earlier this week, the Department of Industrial Policy and Promotion (DIPP) under the minister of commerce and industry, moved a cabinet note seeking an increase in FDI limit. Earlier, the DIPP had proposed to increase the investment limit to 74%, however, it decided to adopt a more aggressive stand, by arguing that if 100% investment is allowed in sector then companies like Ikea, which produces mass consumption products and accessories and prominent luxury brands will set up stores in India.

Along with this, it has made a case for an increase on the grounds that with full-control over the Indian ventures, foreign retailers will have a sizable presence in India and will be encouraged to source locally. The government official said, 'You cannot expect companies to have five stores in five-star hotels and source from local vendors. In the absence of scale, it makes more sense to import and sell in the Indian market.’

More than luxury brands it is mass consumption items like furniture and garments that are expected to add to the sourcing wave, as several large firms already source from Indian venders for their stores in other courtiers. The government is of the view that if FDI limit is increased then the volume is expected to increase significantly if there are outlets in India too. Similarly industry experts are of the view that if investment limit is increased then the domestic industry especially the mom-and-pop store will not be affected. And increased limit will help domestic industry to enhance level of sourcing from local players.

The move of increasing FDI limit in single brand retailing has comes at a time, when the government is not capable of pushing a proposal of increasing FDI limits in multi-brand retails, allowing international players such as Wal-Mart and Best Buy to open stores. Earlier, the DIPP’s proposal of increasing FDI limit in multi-brand retail had got approval from committee of secretaries, however, because of lack of political accord, the progress on the development got slower.  Further, the commerce and industry minister is also hopeful that he would be able to push through the proposal to increase the ceiling for single-brand retail. If all goes well, the industry department is hoping to get a green light by the end of the year.

The S&P CNX Nifty is currently trading at 5,150.50, down by 70.55 points or 1.35%. The index has touched a high and low of 5,198.60 and 5,142.25 respectively.  There were 17 stocks advancing against 33 declines on the index.

The top gainers of the Nifty were Sun Pharma up by 1.91%, HCL Tech up by 1.61%, Hero MotoCorp up by 1.40%, TCS up by 0.98% and Cairn up by 0.96%.

ICICI Bank down by 4.52%, Tata Steel down by 4.43%, Hindalco down by 3.94%, L&T down by 3.09% and Axis Bank down by 2.90% were the major losers on the index.

Meanwhile, most of the Asian markets were trading in the green; Shanghai Composite gained 0.43%, Hang Seng surged 1.03%, Jakarta Composite inched up by 0.02%, KLSE Composite added 0.25%, Nikkei 225 surged 0.31%, suel composite up 2.51% and Taiwan Weighted was trading higher by 0.80%. On the flip side Straits Times down by 0.01%.