Post session - Quick review

Local barometer gauges staged a terrible wash-out at the start of the fresh week.  After swinging in and out of major technical levels, benchmark front line indices nose-dived to lowest point of the day to conclude the high volume trade on an absolute abysmal note. Shockingly dismal IIP data pulverized the sentiment of trade in early deals, prompting risk aversion at the start of the fresh week, which is likely to impact RBI’s upcoming monetary policy review, on December 16, 2011.

In an unexpected and dramatic trend reversal, industrial output growth dropped in October to a worst than 28-month low at -5.1%, indicating a severe slowdown in the country’s growth trajectory. However, Industrial output growth in September, which had been provisionally estimated at 1.9%, now stands revised to 2%. Growth in factory output, as measured in terms of the Index of Industrial Production (IIP), stood at -6% in October last year. During the April-October period this fiscal, IIP growth stood at 3.5% (YoY).

Traders also were risk averse ahead of the November’s headline inflation data on Wednesday. The anticipation is that inflation data may ease to 9.04 percent from 9.73 percent the month before as food prices fell to their lowest in nearly three-and-a-half years.

However, most of the global indices found solace after European policymakers settled on a plan to introduce tougher fiscal rules for the 17-member euro zone countries in their endeavor to avert the onerous debt crisis looming over the European region. Earlier, the US markets closed with gains of over one and half a percent on Friday. While, sentiment in most of Asian pacific markets got uplifted on the back of encouraging US economic reports including that of US consumer confidence data , which came in above estimates at a six-month high , while the nation’s trade deficit that narrowed in October to the lowest level of the year, reflecting a drop in imports, also boosted the investors’ morale.

Back home, weakness sped up at the late hours of trade at Dalal Street post European markets awoke to a generally negative biased start, with Moody's criticizing the actions of eurozone leaders last week to the ongoing debt crisis as providing no new solutions. Traders remained nervous as Britain chose not to join the deal, while eyes will be on Standard & Poor's, which last week warned the eurozone of a downgrade if it is unable to come up with a viable plan.

Back on street, Aviation stocks took off pretty well on the reports of Civil Aviation Ministry's green signal of 26% FDI in the sector. Reacting to this debt ridden-Kingfisher Airlines and Jet Airways (India) surged over 0.50%. Information Technology stocks also emerged triumphant amidst sluggish trend, post Indian currency leading declines in a basket of 10 Asian currencies. IT companies like TCS, Infosys, HCL Tech, Cognizant and Wipro that export software services and earn their revenues in dollars moved higher.On the flip side, metal stocks were the one that got completely clobbered out of shape with a cut of over 2.50%. Metal and mining stocks declined on worries that global economic slowdown could hurt demand. Jindal Saw, SAIL, Hindustan Zinc, Sesa Goa, Sterlite Industries, NMDC, Tata Steel, JSW Steel, Hindalco Industries, and Bhushan Steel dropped between 1.7% to 5%. Following the suite, stocks from Auto and Oil & Gas too appeared in the list of worst performers.

A lot of damage was done to the frontline indices at trade today. 30 share barometer index- Sensex-tanking over 250 points ended sub 16300 level. Similarly, 50 share broadly followed index -Nifty- too offloading over a century of points shut shop sub 4800 level. The broader indices despite showcasing relatively lower losses, went home with a cut of over 0.75% each

The market breadth on the BSE ended negative; advances and declining stocks were in a ratio of 832:1886 while 144 scrips remained unchanged.

The BSE Sensex lost 354.15 points or 2.18% and settled at 15,859.31. The index touched a high and a low of 16,360.32 and 15,839.96 respectively. 3 stocks advanced against 27 declining ones on the index (Provisional)

The BSE Mid-cap index lost 2.08% while Small-cap index was down by 1.62%. (Provisional)

On the BSE Sectoral front, IT up 1.05% was the only gainer while, Metal down 4.25%, Bankex down 3.35%, Oil & Gas down 3.07%, PSU down 3.02% and Realty down 2.86% were the top losers.

The top gainers on the Sensex were Wipro up 2.42%, TCS up 1.31% and Infosys up 0.81%.

On the flip side, Tata Power down 6.88%, Hindalco down 6.03%, JP Associates down 5.45%, Jindal Steel down 5.28% and SBI down 4.99% were the top losers on the index. (Provisional)

Meanwhile, India’s Index of Industrial Production (IIP) for month of October 2011 fell at its 28 month lowest level and registered contraction of 5.1% which reflects the industrial growth getting affected by the non-stop rate hikes by the Reserve Bank of India (RBI) and high inflation. According to the data released by the Ministry of Statistics & Programme Implementation, industrial production measured by the IIP stood at -5.1% in October 2011 compared to 11.37% in October 2010. During the first seven months of current financial year, IIP growth stood at 3.5% compared to 8.7% in the same period of 2010.

The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of October 2011 stood at 120.9, 165.9 and 152.1 respectively, with the corresponding growth rates of (-) 7.2%, (-)6.0% and 5.6%. The cumulative growth in the three sectors during April-October, 2011-12 over the corresponding period of 2010-11 has been (-)2.2%, 3.7% and 8.9% respectively, which moved the overall growth in the General Index to 3.5%.

In October 2011, in terms of industries, 13 out of the 22 industry groups in the manufacturing sector have shown positive growth during the month of October 2011 as compared to the corresponding month of the previous year. The industry group ‘Medical, precision & optical instruments, watches and clocks’ has shown the highest growth of 30.8%, followed by 18.4% in ‘Office, accounting & computing machinery’ and 15.3% in ‘Radio, TV and communication equipment & apparatus’. On the other hand, the industry group ‘Electrical machinery & apparatus n.e.c.’ has shown a negative growth of 58.8% followed by 12.1% in ‘Machinery and equipment n.e.c.’ and 11.4% in ‘Rubber and plastics products’.

As per Use-based classification, the growth rates in October 2011 over October 2010 are (-) 0.1% in Basic goods, (-) 25.5% in Capital goods and (-) 4.7% in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of (-) 0.3% and (-) 1.3% respectively, with the overall growth in Consumer goods being (-) 0.8%.

Some of the important items of capital goods showing high negative growth during the current month and thus contributing to the low growth of the overall index for the month include ‘Cable, Rubber Insulated’ [(-) 82.9%], ‘Cement Machinery’ [(-) 74.6%], ‘Insulated Cables/Wires all kind’ [(-) 38.2%], ‘X-ray equipment’ [(-) 35.8%] and ‘Plastic Machinery including Moulding Machinery’ [(-) 32.3%]. However, some important items of the capital goods are also showing significant growth. These are:  ‘Conductor, Aluminium’ (46.6%), ‘Boilers’ (45.8%), ‘Heat Exchangers’ (35.5%) and ‘Machine Tools’ (31.4%).

The other important items showing growth during the month are: ‘Fruit Pulp’ (254.2%), ‘Cashew Kernels’ (91.9%), ‘Petroleum Coke’ (69.7%), ‘Rice’ (54.4%), ‘Marble Tiles/Slabs’ (47.2%), ‘Steel Castings’ (41.7%), ‘Leather Garments’ (33.6%), ‘Aluminium Tubes/Pipes’ (30.8%) and ‘Woollen Carpets’ (30.7%).

Meanwhile the government had also revised the IIP growth figures for September. After the upward revision, the IIP figure for month of September increased to 2% from the provisional estimate of 1.9%. 

Most of the experts and policymakers had expected that IIP for the month of October will be slower, but not negative figures. C Rangarajan, chairman of PMEAC said that the data was disappointing particularly that of capital goods. According to Rangarajan the public sector investment needs to pick up for any sort of a recovery. 'I think containing fiscal deficit at 4.6% will be a challenge,' he said adding, '…still hoping for GDP growth between 7 and 7.5%,' said Rangarajan.

In the second quarter of 2011-12, India’s economic growth stood at 6.9% with is lowest in last eight quarters as a result, in the first six months of current fiscal year, India’s Gross Domestic Product (GDP) fell to 7.3% compared to 8.85% in the same period of last financial year.

IIP’s discouraging figures for October has raised the expectation that the RBI would reduce its policy rates at its upcoming review on December 16. However, a lot will depend on the wholesale price index (WPI) based inflation data for November 2011 which will be released on December 14. India VIX, a gauge for market’s short term expectation of volatility lost 0.88% at 29.27 from its previous close of 29.53 on Friday. (Provisional)

The S&P CNX Nifty lost 104.75 points or 2.15% to settle at 4,761.95. The index touched high and low of 4,910.25 and 4,755.55 respectively. 4 stocks advanced against 46 declining ones on the index. (Provisional)

The top gainers on the Nifty were Wipro up 2.54%, TCS up 1.20%, HCL Tech up 1.08% and Infosys up 1.02%.

On the other hand, Tata Power down 7.04%, Hindalco down 6.32%, SAIL down 6.02%, JP Associates down 5.68% and Jindal Steel down 5.48% were the top losers. (Provisional)

The European markets are trading in red, with France's CAC 40 down 1.34%, Germany's DAX down 1.98% and FTSE 100 down 0.85%.