Indian equities trim gains; trades inline with European counterparts

Indian equities trim gains but continued their firm trade in green in the late afternoon session. The sentiments got support from speculations that the Reserve Bank of India in its mid-quarter policy review on June 18 will be compelled to cut key interest rates irrespective of what the headline inflation number may show on June 13. Traders were seen piling up position in Bankex, Consumer Durables and PSU sector while selling was witnessed in Heath Care, Power and FMCG sector. The market participants also went on to overlook the disappointing industrial production numbers for April that showed IIP expanded at a frustratingly slow pace of 0.1% in the month of April, indicating gloomy economic growth prospects. Further, data on first installment of the advance tax payment which is due on June 15, 2012 could provide cues on Q1 2012 corporate earnings and provide further directions to the market. In the scrip specific development, Maruti Suzuki India was seen trading firm in green after the board of directors approved a proposal to merge Suzuki Powertrain India with itself. DLF was seen trading firm after its arm DLF Hotel Holdings, divested its entire shareholding in Adone Hotels and Hospitality for Rs 567 crore. Sterlite Industries was firm in green on reports that the company has acquired a 24.5% stake in Raykal Aluminium Company, a unit of Larsen & Toubro.

On the global front, the Asian markets were trading in red while the European markets were trading in green on optimistic note. On the home turf, the NSE Nifty and BSE Sensex were trading above their psychological 5,050 and 16,700 levels respectively. The market breadth on BSE was negative in the ratio of 1067:1408 while 149 scrips remained unchanged.

The BSE Sensex is currently trading at 16,716.32 up by 48.31 points or 0.29% after trading as high as 16,776.54 and as low as 16,553.47. There were 17 stocks advancing against 13 declines on the index.

The broader indices were trading on a negative note; the BSE Mid cap index lost 0.03% while Small cap index eased 0.18%.

On the BSE sectoral space, Bankex up 0.91%, Consumer Durables up 0.66%, PSU up 0.49%, Auto up 0.48% and Capital Goods up 0.35% were the major gainers, while Health Care down 0.84%, Power down 0.32% and FMCG down 0.05% were the only laggards in the space.

Sterlite Industries up 1.23%, Maruti Suzuki up 1.14%, Coal India up 1.10%, SBI up 0.85% and HDFC Bank up 0.82% were the major gainers on the Sensex, while Wipro down 2.06%, Dr Reddy’s Lab down 1.89%, Tata Power down 1.66%, HUL down 0.86% and Tata Steel down 0.62% were the major losers in the index.

Meanwhile, after March month’s shocking industrial production numbers, India's index of industrial production (IIP) expanded at a frustratingly slow pace in the month of April, indicating that Asia’s third largest economy is still struggling to return to a high growth trajectory. According to the data released by Central Statistics Office, the gauge of industrial production in the country grew at a worse than expected rate of merely 0.1 percent in the month of April 2012 as against 5.3 percent growth in the corresponding month of the previous year and (-3.5) percent in March 2012.

The IIP numbers upset market participants and economist as it was widely expected that manufacturing activity would expand at the rate of around 1.5 percent in the month of April. Moreover, the CSO data also showed that cumulative growth for the period April-March 2011-12 stood at 2.8 percent over the corresponding period of the previous year.

The industrial output has remained fragile in the past few months as growth in all three sectors viz. mining, manufacturing and electricity got dampened. Growth in electricity sector, the most resilient of the three, too has tapered as it expanded by 4.6 percent in April as against 6.5 percent in April last year. However, the performance of manufacturing sector, which accounts for about 76 percent of industrial output, once again remained the reason for disappointment as it remained almost flat with a growth rate of just 0.1 percent compared to 5.7% in the same month last year.

The mining sector, which has been hit by series of bans in various states after scandals involving illegal extractions were uncovered, too continued its declining momentum as it decelerated by 3.1 percent in April as against growth of 1.6 percent in the same period last year. As per-use based classification, the growth rates in April 2012 over April 2011 was 2.3% in Basic goods, -16.3% in Capital Goods and -1.4% in Intermediate goods. The Consumer durables and Consumer non-durables recorded growth of 5.0% and 5.4% respectively, with the overall growth in Consumer goods being 5.2%.

Thus, the April factory activity numbers clearly indicate that industrial growth remains extremely fragile, and it is in clear need of monetary as well as fiscal support. Experts are also of the belief that the Reserve Bank of India in its mid-quarter policy review on June 18 must cut key interest rates irrespective of what the headline inflation number shows on June 13, in order to bring Asia’s largest economy out of the doldrums.

The S&P CNX Nifty is currently trading at 5,070.05, higher by 15.95 points or 0.32% after trading as high as 5,089.45 and as low as 5,015.15. There were 32 stocks advancing against 17 declines while 1 stock remained unchanged on the index.

The top gainers on the Nifty were Ambuja Cement up 2.72%, BPCL up 2.36%, ACC up 2.32%, PNB up 1.96% and IDFC up 1.68%.

JP Associates down 2.45%, Ranbaxy down 2.22%, Wipro down 2.01%, Dr Reddy’s down 1.94% and Siemens down 1.55% were the major losers on the index.

In the Asian space, Shanghai Composite declined 0.70%, Hang Seng fell 0.43%, Jakarta Composite shed 0.67%, KLSE Composite dropped 0.16%, Nikkei 225 plunged 1.02%, Straits Times Index eased 0.02%, KOSPI Composite Index sank 0.66% and Taiwan Weighted shrank 0.68%.

The European markets were trading in green with, France’s CAC 40 advanced 0.40%, Germany’s DAX rose 0.39% and the United Kingdom’s FTSE 100 added 0.03%.