Weak industrial output beats living daylights out of Sensex

Renewed selling gripped the bourses after the latest data showed a lower-than-expected 6.2% growth in industrial production for October 2006.

At 13:30 IST the Sensex was down 197 points, at 13,201. The data of October industrial output hit the market at about 12:15 IST.

Some of the major losers among the Sensex constituents were State Bank of India (down 3.9% to Rs 1,194), Bhel (down 3.4% to Rs 2,445), Tata Motors (down 3.4% to Rs 810.50), Reliance Energy (down 3.2% to Rs 508.80), HDFC (down 2.6% to Rs 1,503.50), Hindustan Lever (down 2.7% to Rs 223), TCS (down 2.2% to Rs 1,145) and ONGC (down 2.2% to Rs 817).

India's industrial production rose 6.2% in October from a year earlier, well below market expectations due to lower-than-expected manufacturing output, government data showed on Tuesday. Output growth for September remained unchanged at an annual 11.4% reported earlier. Manufacturing production, which represents more than 75% of industrial output, rose 6% in October from a year earlier, compared with 12% annual growth in September.

After the latest economic data, market men will now be closely eyeing advance tax payment by corporates for the third installment, which falls due on 15 December 2006. The corporate advance tax payment will provide a broad outline for the quality of Q3 corporate results. This is more so given that strong earnings growth has been a key driver of the bull-run on the bourses.

The market witnessed immense volatility today. The barometer index has swung over 700 points so far, between some vital intra-day tops and bottoms.

Fears of rise in interest rates following RBI’s surprise 50 basis point hike in cash reserve ratio (CRR) rattled the bourses on 11 December, when the Sensex tanked 400 points.

FIIs pressed heavy sales in the derivatives segment in the past two trading sessions. FIIs were net sellers to the tune of Rs 1,250 crore in index based futures on 11 December, the day when the Sensex plunged 400 points. FIIs were net sellers worth 1,087 crore in index based futures on 8 December, when the Sensex lost 173 points.

In the near term, US Federal Reserve’s decision on US interest rates remains a principal trigger for domestic bourses. US Fed meeting is due later today and expectations of interest rates staying unchanged run high. Analysts will closely watch the Fed’s accompanying statement for cues of future rate moves. Investors are waiting to see if the Fed will tone down its hawkish stance in its statement accompanying the decision.