Friday, February 11, 2011

LOOSING STREAK HALTED

The last trading day of the week brought some breather for the retreating domestic benchmarks as hefty bottom fishing in the second half of trade underpinned the indices. Good buying interests were witnessed in majority of beaten down heavyweights stocks. The frontline indices managed to snap the three day downtrend on a day when government released a worse than expected IIP numbers for the month of December, which slowed down sharply to touch 1.6%, even lower than the 2.7% seen in the previous month. The beaten down local markets which were besieged by negative factors like the disappointing IIP numbers coupled with weak European market opening managed to stand tall on this Friday as sanguine investors remained busy hunting for bargains. The NSE's 50-share broadly followed index, Nifty jumped around over one and half a percent to settle above the crucial 5,300 level while the Bombay Stock Exchange's Sensitive Index, Sensex garnered over two hundred fifty points to close over the psychological 17,700 mark. The broader markets fired on all cylinders after a very long gap as they outperformed their larger peers by quite a margin. The BSE's midcap and smallcap indices rocketed around 3% each. The Banking counter on the BSE sectoral space was the biggest gainer with 3.50% gains as heavyweights like ICICI Bank and SBI bank pulled the index after surging 4.17% and 3.52% respectively. The consumer durables pocket too witnessed huge buying as it soared 2.58% after shares of companies like Gitanjali Gems and Whirlpool gathered 18.89% and 6.92% respectively. The bounce back in index bellwether Reliance Industries which surged 1.23% too spurted the rise on the Sensex. On the other hand the IT and Technology packs once again languished at the bottom of the table as they registered single digit losses.
On the global front, cues largely remained sluggish as markets in Asia closed on a mixed note with the Chinese benchmark extending its gains after getting underpinned by the rally in property sector on a report that country's house prices continued to rise in January. While, Taiwanese stocks witnessed the maximum damage in the space as it plummeted more than 2.5% for the day.  However the European counterparts continued to trade on a somber note as the benchmarks there were trading with notable losses with the CAC 40 plunging over a percent, being the top loser in the space. On the other hand, the screen trading for US index futures also indicated that the Dow could open with a cut of 0.47%.
Earlier on the Dalal Street, the index commenced on a cautious note tracking the mixed cues from the Asian markets and investors also remained apprehensive owing to the renewed uncertainties in Egypt after President Hosni Mubarak said he would transfer the reins of power to his vice president, but would not step down before elections in September. Sentiments stayed weak through the late morning and early afternoon session as the weaker than expected December IIP data weighed. However, there appeared some resurgence in the markets after Planning Commission Deputy Chairman, Montek Singh opined that volatile IIP is not a fitting indicator of overall GDP and also affirmed that the economic growth is on track and will surely achieve the forecasted target of 8.5% growth for the fiscal year 2011. The indices treaded on a northbound journey thereafter as banking and financial stocks soared. The markets eventually settled around the high point of the day and went home with strong gains of well over one and half a percent. Volumes for markets remained at over Rs 1.45 lakh crore while the turnover for NSE F&O segment too at over Rs 1.37 lakh crore on Friday. The market breadth on the BSE was positive as there were 2083 shares on the gaining side against 762 shares on the losing side while 104 shares remained unchanged.
Finally, the BSE Sensex zoomed 265.57 points or 1.52% to settle at 17,728.61 while the S&P CNX Nifty jumped 84.20 points or 1.61% to end at 5310.
The BSE Sensex touched a high and a low of 17,752.56 and 17,295.62, respectively.
The top gainers on the Sensex were Jaiprakash Associates up 7.35%, Reliance Infra up 5.20%, ICICI Bank up 4.17%, L&T up 3.99% and HDFC up 3.89%.
Hindalco Inds down 2.27%, Tata Power down 1.59%, Bharti Airtel down 1.08%, HUL down 1.03% and Tata Steel down 0.79% were the top losers on the index
The BSE Mid-cap and Small-cap indices surged 2.92% and 2.94%, respectively.
Meanwhile, India's industrial production slowed down sharply in the month of December to touch 1.6%, even lower than the 2.7% seen in the previous month. While a lot of base effect is involved in the figure, as there was a very sharp jump in IIP in the same month of last year, the figure still is somewhat below the market expectations, particularly after the infrastructure industries had registered over 6% growth for the month under review.
The sharp downside was mainly because of the slowdown in manufacturing activity that slumped to just 1% growth compared with over 19% growth seen in the year-ago period. The electricity production grew by 6% in Dec 2010 against 5.4% in the same month a year ago. Mining sector on the other hand slowed down to 3.8% from a high base of 11.1% growth seen in the year-ago period.
Looking at the used based classification, growth in the consumer durables, which have been a major contributor to the IIP rally in early 2010, slowed down to 18.5% compared with 41% seen in the year ago period. Consumer non-durables on the other hand contracted by 1.1% compared with a growth of 3% seen in the same month last year. Basic goods registered reasonable growth at 5.2% against 8.4% in the year-ago period. Intermediate goods recorded 6.6% expansion against 23.5% in Dec 2009.
The cumulative growth in industrial production over the April-December period of current fiscal stood at 8.6%, unchanged compared with the growth seen in the same period of last year. The only difference is cumulative growth was on rising trajectory in last fiscal and is on a downhill journey this fiscal. The only consolation perhaps is that the industrial growth for the last month has been increased to 3.6% against 2.7% a year ago.
While the slowdown looks very sharp in the year-on-year numbers, the same is unlikely to be the case with month-on-month basis. Since there was a record high jump in the IIP in December last year, it is quite natural that the year-on-year growth would look tepid even if the industrial production improves significantly on a sequential or a month-on-month basis.
Economists feel that the seasonally adjusted figures would show significantly better growth on sequential basis. Also, the 1993-94 based index itself is out of touch with the currently realities and probably has not been able to reflect the actual industry momentum with a lot of accuracy over the recent period. Given these factors, it would be reasonable not to read too much in the IIP, particularly in the year-on-year numbers, and rather stress on reasonable month-on-month growth and good performance seen in other indicators like the purchasing managers' index. 
In BSE sectoral space Bankex up 3.50%, Consumer Durables (CD) up 2.58%, Auto up 2.56%, Capital Goods (CG) up 2.04% and Realty up 1.75% were the major gainers.
On the other hand, Information Technology (IT) down 0.12% and TECk down 0.08% were the only losers in the BSE sectoral space.
With few days left in the union budget to be presented on February 28, 2011, leading players in the packaging industry have demanded rationalization of excise duty on raw materials as the industry is facing cost escalation. The industry also wants reduction in import duty/ countervailing duty on tinplate, an important raw material for making tin containers used for food and non-food products. Another demand of the industry is to reduce excise duty on specific printing, writing and packing paper.
The metal packaging industry, which is burdened with accumulation of debt, also wants some financial assistance to ease off the burden, probably in form of reduction in excise duty that will work as an indirect stimulus to the industry. The industry will also be benefitted by reduction in the import duty on capital equipment for technological up gradation. Finally, the industry is seeking nil rate of customs duty on import of waste paper and wood pulp, which can be recycled and then used in packaging.
The Indian packaging industry, which is currently worth Rs 63,000 crore, is growing at more than 11% per annum and is expected to cross a turnover of Rs 95,000 crore by 2015. The growth in the packaging industry in India is mainly driven by the food and the pharmaceutical packaging sectors. Packaging of essential products like food, beverage, milk, vegetable, food grains and pharma are the key driving segments because of the huge domestic consumption and any positive steps taken in regard to these industries will provide a big boost to the packaging industry.
Further, if the government agrees on rationalizing the import duty structure, it will boost the overall growth in the industry both in domestic and in international markets. Further, since the growth of packaging industry is directly related to the FMCG and pharma industries, any sops that the government announces for these industries will also help the packaging industry.
The S&P CNX Nifty touched a high and a low of 5319.45 and 5177.70, respectively.
The top gainers on the Nifty were Jaiprakash Associates up 8.39%, IDFC up 7.66%, Tata Motors up 6.12%, Kotak Mahindra Bank up 5.23% and Axis Bank up 5.19%.
On the other hand, Hindalco Inds down 1.99%, Tata Power down 1.76%, Tata Steel down 1.47%, HUL down 1.06% and Bharti Airtel down 0.95% were the major losers on the index.
European markets were trading in the red on Friday. France's CAC 40 shed 1.02%, Germany's DAX slipped 0.48% and Britain's FTSE 100 dipped 0.54%.
Asian markets made a mixed closing on Friday; Hong Kong's benchmark stock index eked out some gains on the final trading of its worst week in nine months. On the same time the Chinese markets moved higher supported by a rally in the property sector on a report that country's house prices continued to rise in January. Also ahead of the economic data for January, due next week, which is expected to show that lending surged and inflation accelerated in the country. While the Japanese markets remained closed the Taiwanese markets were pummeled down yet again by more than 2.5% for the day.

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