Another weak start on cards reacting to IIP and CPI data

The Indian markets fell for the third consecutive day in last session and major indices lost over a percent on weak global cues and ahead of some key macro-economic data. Today, the start is likely to be weak and traders will be reacting negatively to the double whammy of contraction in IIP and surge in Consumer Price Index. India's annual industrial output growth measured by index of industrial production (IIP) contracted by 1.8% at 168.5 in the month of October over the corresponding month of previous year, while the CPI (Combined) for November 2013 on point to point basis surged to nine months high level at 11.24%. Reserve Bank of India (RBI) Governor Raghuram Rajan said inflation was higher than the central bank's comfort zone, while growth was weaker than estimated and vowed to calibrate policy carefully. Traders will also be eyeing at rupee movement, which witnessed its biggest fall in a month against the US currency in last session on sustained dollar demand from importers. There will be some buzz in the oil and gas sector, as the Oil Ministry has given freedom to firms - including Reliance Industries and GAIL India - to fix the marketing margin they want to charge on sale of natural gas to consumers other than urea manufacturing units and LPG plants.

The US markets remained under pressure on concern of Fed scaling back its stimulus program in the near future after a report showed slightly stronger than expected retail sales growth in the month of November and traders even shrugged the report of a sharp jump in weekly jobless claims. The Asian markets have once again made a weak start with some of the indices trading lower by about half a percent in early deals amid concerns the US Federal Reserve will start tapering sooner than later.

Back home, Thursday turned out to be another disappointing session for the Indian equity indices which got pounded by over one percentage point. Indian barometer gauges, prolonging their southward journey for the third consecutive session, witnessed blood bath and closed near their intraday low, breaching major crucial support levels 21,000 (Sensex) and 6,250 (Nifty) as investors remained on sidelines ahead of October IIP, November CPI data which could provide clues on RBI’s stance in its upcoming monetary policy meet in the coming week. On the macro-front, the IIP is estimated to fall to 1.2% from 2% in the previous month, while CPI is expected to remain in double digits, at 10%. Selling was both brutal and wide-based as, barring power; none of sectoral indices on BSE could manage a green close. Counters, which featured in the list of worst performers, auto, banking and metal. Investors also remained concerned with Standard & Poor’s (S&P) statement that India’s sovereign rating could come under threat if the general election due next year threw up a hung Parliament or the government was unable to push through reforms. Also, India’s export growth slipped to a five-month low of 5.86 percent in November as shipments of petro-goods, pharma, automobile and gems and jewellery fell. Selling got intensified as European markets made a poor start, moreover, all the Asian equity markets shut shop in the red. Some pessimism also came in from the currency front, the rupee was at 61.68 per dollar at the time of equity markets closing versus its previous close of 61.25 on Wednesday. Selling in banking stocks too dampened the sentiments with scrips like ICICI Bank, SBI, PNB, HDFC Bank etc. edged lower on fears of another rate hike being in store in the upcoming RBI’s monetary policy meet. Finally, the BSE Sensex plunged by 245.80 points or 1.16%, to settle at 20925.61, while the CNX Nifty lost 70.85 points or 1.12% to settle at 6,237.05.