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IIP data drags Sensex 245 pts, ignores inflation; midcap up


The News International Team

After a small break on last Friday, the selling pressure resumed again on Monday dragging the Sensex below 27000 level dented by weak industrial output in July despite significant fall in August inflation. Global nervousness ahead of FOMC meet (which will begin on Tuesday) too caused pressure. However, the broader markets outperformed benchmarks and the market breadth remained positive.
The 30-share BSE Sensex fell 244.48 points to close at 26816.56 and the 50-share NSE Nifty lost 63.50 points to 8042 whereas the BSE Midcap and Smallcap indices were up 0.12 percent and 0.65 percent, respectively.

According to Mahesh Nandurkar of CLSA, the coming festive season should be a barometer of Indian economic recovery.

Meanwhile, the Indian rupee breached 61 level, hitting a four-month low intraday on the bank of weakness in equity markets and increased demand for dollars overseas. It was down 49 paise to 61.14 a dollar at close.

Prabhat Awasthi, Nomura says a stronger dollar, driven by expectations of divergent monetary policies of the Fed and other major developed world central banks is positive for Indian equities on an overall basis.

Historically, broad dollar strength typically begins 6-9 months ahead of a rate tightening cycle, a phase we believe India is now entering, he elaborates.

On the economic data front, WPI inflation hit five-year low in August, easing to 3.74 percent as against 5.19 percent in July supported by low food and fuel cost.

“The WPI index is less relevant today from the point of view of monetary policy but still is indicative of prices at a different level,” said CARE Ratings, adding it still does not think the RBI will lower interest rates on September 30 based on this information.

CPI inflation (announced on Friday evening) also declined to 7.8 percent versus 7.96 percent on month-on-month basis but industrial output dropped sharply to 0.5 percent in July from 3.9 percent in June on weak growth in manufacturing, capital goods and consumer goods sectors.

Stocks in Action

Shares of oil & gas, metals, technology, FMCG, capital goods, power and auto stocks were under pressure.

Jindal Steel and Hindalco Industries topped the selling list, falling 4.6 percent and 3 percent, respectively. Tata Steel and Sesa Sterlite were down over 1.5 percent after China’s industrial production grew 6.9 percent last month, its weakest rate since December 2008, as against 9 percent growth in July.

Shares of TCS, HDFC, ITC, Reliance Industries, ONGC, L&T, ICICI Bank, Infosys, Tata Motors, M&M and Sun Pharma dropped 0.8-1.8 percent.

However, Cipla bucked the trend, up 2.8 percent as the company entered into a licensing agreement with Gilead to increase access to Hepatitis C treatment.

Another drug maker Lupin ended at record closing high of Rs 1414, up 4 percent on a media report that the company is in advanced talks to sign a blockbuster deal with Merck Serono.

Private sector lender HDFC Bank climbed 0.5 percent as managing director Aditya Puri is affirmative that the growth will get back to 25 percent and even 30 percent growth when the economy gets back to 6-7 percent growth, which he expects by FY16.

Two-wheeler maker Hero Motocorp rose 1.6 percent as company expects very strong sales in festive season and expects sales of 6 lakh 2 wheelers during Diwali.

In the broader space, Fortis Healthcare shot up 6.7 percent on selling RadLink-Asia stake to Medi-Rad Association for about USD 110 million while Bajaj Electricals gained 1.5 percent on winning eight new orders worth Rs 518.5 crore.

Atlas Cycle Industries gained 7 percent after Uttar Pradesh government decided to exempt VAT on bicycles costing less that Rs 3,500 whereas YES Bank tanked 5 percent after FII investments reached trigger limit.

Advancing shares outnumbered declining ones by a ratio of 1756 to 1309 shares on the Bombay Stock Exchange.


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