DISHEARTENING SESSION

It turned out to be a disheartening session for the local stock markets which panicked under fears of further rate tightening on inflationary pressure and global slowdown. Investors overlooked the unexpectedly higher March IIP numbers which came in at 7.3% against 3.6% reported  in the month of February as sentiments got spooked by finance minister Pranab Mukherjee's statement that he expected the IIP numbers to be little higher. While another thought that does not seem to have gone down well with market participants is that strong IIP figures will give the RBI further room to carry on with its tightening spree. The FII are consistently ploughing back significant portions of their funds on expectations that macroeconomic headwinds will eat in to their returns in the time to come and force the stock markets to underperform. Meanwhile, the butchery in markets across the globe on the back of yet another broad based crash in commodities too had adverse repercussion on local investor's morale. However, this could prove to be a blessing in disguise for the Indian markets as cooling international oil prices would automatically ease the spiraling inflationary pressure and give a major respite to RBI. The NSE's 50-share broadly followed index Nifty shaved off around one and half percentage point and settled way below the psychological 5,500 level while Bombay Stock Exchange's Sensitive Index, or Sensex too took a nasty cut of almost two hundred fifty points and ended below the psychological 18,350 level. The broader markets on the other hand showed some resilience initially, however they succumbed to the selling pressure by the close of session.  The midcap index fell 0.91% while the smallcap index slipped 1.06%. On the sectoral front, the Metal counter bore the maximum brunt of ruthless position squaring and ended with massive losses of 2.99% because of a 4.66% cut in Hindalco Industries and 4.76% cut in Sterlite. While another pocket which languished at the bottom of the table was Capital Goods which plunged 1.42% due to decline in stocks like L&T and BHEL which sank 1.56% and 1.62% respectively. While the only index which managed to close in the green terrain was Realty which added 0.48% as stocks like Sunteck Realty and HDIL amassed 16.45% and 2.20% respectively. Moreover, negative close for bellwethers like RIL and Infosys added to the downside pressure for the markets. On the result front, stocks like Lupin, Usha Martin Education, Syndicate Bank, Adani Enterprises' and Tips Industries got commended by the investors in the session.

On the global front, majority of Asian equity indices settled with large cuts of over a percent on the back of another broad based crash in commodities prices amid global inflationary pressure and rebound in American dollar. The South Korean benchmark nosedived by over two percent, being the top laggard in the space. The European indices on the other hand got pounded by over one and half a percent, dragged lower by basic resources, as commodity prices came under pressure again, while concerns over sovereign debt continued to rattle investors. On the other hand, the screen trading for US index futures too indicated that the Dow could open with around half a percent of cut.

Earlier on Dalal Street, the benchmark got off to a pessimistic start tracking leads from the Asian equity indices which mostly traded on a negative note as investors in the region largely remained influenced by the Wall Street which plunged sharply with energy and materials companies suffering worst declines.  After beginning the session on a weak note the frontline indices gyrated in a narrow range as investors remained cautious ahead of IIP data. Despite the surprisingly strong IIP numbers the indices barely managed to touch the green territory and drifted to lower levels after the government released weekly inflation numbers. The indices got some support around the 5,550 and 18,500 levels in the early afternoon session however discouraging leads from the European markets and unrelenting across the board profit booking pounded the indices way below the psychological 5,500 and 18,500 levels by the end of session. Eventually, the bourses snapped session with a nasty blow of around one and half a percent. Markets declined on larger volumes of over Rs 0.88 lakh crore while the turnover for NSE F&O segment remained lower compared to Wednesday at over 0.76 lakh crore. Market breadth remained abysmal as there were 943 shares on the gaining side against 1848 shares on the losing side while 133 shares remained unchanged.

Finally, the BSE Sensex slipped 249.17 points or 1.34% to settle at 18,335.79 while the S&P CNX Nifty lost 78.90 points or 1.42% to end at 5,486.15.

The BSE Sensex touched a high and a low of 18,610.02 and 18,314.34 respectively. The BSE Mid-cap and Small-cap indices declined by 0.91% and 1.06% respectively.

ONGC up 0.58%, Hindustan Unilever up 0.52%and DLF up 0.18% were only gainers on the Sensex.

On the flip side, Sterlite Industries down 4.76%, Hindalco Industries down 4.66%, HDFC down 2.77%, TCS down 2.31% and Jaiprakash Associate down 2.25% were the major losers on the index.

India's industrial growth-IIP has surprisingly jumped to 7.3% in March from 3.6% in February; however the Industrial production had grown 15.5% a year ago. The Industrial output has remained fragile in the past few months hurt by the central bank's aggressive stance against inflation which has affected the pace of expansion of the economy. Another reason for the March numbers looking shoddier, is mainly on account of a high base effect despite the figures being better than consensus expectations of around 3.61%. The unexpected improvement has came on the back of strong performance by the capital goods numbers which after three months of contraction  increased by 12.91% compared to 36% (Y-o-Y).

Clearly, even as some segments have slowed down, it is the sharp expansion in the capital goods products which has pulled up growth in overall IIP. Some of the important items of Capital goods that contributed to the high growth in this category were Turbines (steam/hydro) rising by 67.6%, Process control instruments up by 42.9%, Boilers gaining by 31.5% and Complete tractors which rose by 30.2%. Alarm time pieces up 59.7%, Two wheeler tyres up 55.5% and Passenger cars up 33.6% were some of the important items that contributed towards the high growth of Consumer durable goods.

Manufacturing sector which accounts for almost 80% of the IIP product-mix expanded by 7.9% compared with 16.4% growth seen in the same month a year ago. Electricity sector also performed well expanding at 7.2% as against 8.3% growth a year ago. Mining was the only sector that failed to perform well with growth of just 0.02% compared with 12.3% growth a year ago.

Consumer durables, which were responsible for early part of the IIP rally last year, expanded at 12.3% against 23.4% in the year-ago period. Consumer non-durables on the other hand saw significantly better growth of 5.7% as against a growth of 1.5% seen in the same month of previous year. Intermediate goods showed some slowdown with a growth of 5.4% against 13.5% expansion seen last year. Production of basic good grew by 4.3% versus 10.5% in March 2010.

Realty up 0.48% was only gainer in the BSE sectoral space. Metal down 2.99%, Capital Goods (CG) down 1.42%, Bankex down 1.39%, Power down 1.20% and IT down 1.16% were major losers in the BSE sectoral space.

The Department of Telecom (DoT) is planning to hold another round of auction for 3G/2G vacated by defence services, this new round of auction is expected to generate revenue of around Rs 80,000 to exchequer. The DoT had asked Empowered Group of Ministers (EGoM) by circulating note for another auction to meet the industry requirement. This extra spectrum will help to improve the quality of 2G and 3G services. In May 2009, the defence services and DoT had signed a deal for releasing 3G spectrum on timeline based on the rollout of Optical Fibre Network by the DoT for the exclusive use if armed forces.

The new auction is expected within three months, but the actual timeline will be decided by the EGoM headed by Pranab Mukharjee. The DoT is awaiting for responses from all the concerned departments to whom the note has been circulated. The process could take up to a month, thereafter, it will go to the telecom commission for final consideration. It will take into account the views expressed by telecom operators. A final decision could take about two to three months to come.

As per the DoT estimates, 20 MHz spectrum for 3G and 20 MHz for 2G will generate around Rs. 67,002 crore and Rs 12,848 crore, respectively. Previous year, the government generated Rs 106,262 crore from airwaves auctions. Of this 20 MHz of 3G in the 1959-1979 MHz band brought in Rs 67,719 crore, while broadband wireless access led to extra revenue of Rs 38,543 crore.

On the other hand, the KM Chandrasekhar Committee had decided to divide the 1700-2000 MHz band into two equal bands of 150 MHz each for use by the mobile telecom operator and defence services. DoT finds this 150 MHz in the 1700-2000 MHz band for commercial use may not be sufficient to meet the obligation of 2G/3G services. According to Telecom Regulatory Authority of India (TRAI), the total requirement of spectrum in the next five years would be around 500-800 MHz, including 275MHz for voice services alone. 

The S&P CNX Nifty touched a high and a low of 5,572.50 and 5,476.30 respectively.

The top gainers on the Nifty were Siemens up 0.72%, ONGC up 0.62%, Ranbaxy up 0.54%, BPCL up 0.31% and DLF up 0.09%.

The top losers on the index were Sterlite Industries down 5.25%, Hindalco down 5.00%, Sesa Goa down 3.83%, HDFC down 2.89% and Kotak Bank down 2.89%.

European markets were trading in red. France's CAC 40 down 1.41%, Germany's DAX slipped by 1.66% and Britain's FTSE 100 was trading lower by 1.38%.

All the Asian equity indices barring Taiwan Weighted finished the day's trade in the negative terrain on Thursday after a big sell-off witnessed in commodities restricted the investor's hunger for riskier investments, while a short-lived recovery in oil prices was wiped out in late trade.  Chinese weaker-than-expected industrial output data on Wednesday too weighed on sentiments in the region. In addition, Seoul Composite declined more than two percent on Thursday amid foreign selling and the expiry of options, with losses among refiners and automakers, including S-Oil Corp and Hyundai Motor, pressured the market.