Sensex slides on IIP data, rupee fall

The Indian markets ended in deep red on Monday, extending the fall to a third straight trading session with the BSE Sensex closing below the 16,000 mark and the NSE Nifty shutting under the 4800 mark.

A weaker-than-expected IIP data for October coupled with fresh weakness in the rupee were the chief factors that dampened the sentiment today. However, expectations of a pause at this week's RBI policy meet sent yields on the benchmark 10-year government bonds to two-month low. Weak opening in Europe also weighed on the sentiment as Moody's warned of continued risk to sovereign credit ratings despite last week's EU pact on tighter fiscal integration.



The benchmark Indian stock indices were unable to hold early morning gains after the country’s industrial production grew at a much slower pace in October compared to consensus estimates, adding to the pressure on domestic stocks and the rupee.

The index of industrial production (IIP) shrank by 5.1% in October versus 11.3% in the same period a year earlier. While, September's IIP growth was revised to 2%, from 1.9% earlier.

Overall, India’s macro-economic picture has deteriorated rapidly with inflation still above acceptable levels, borrowing costs high, widening twin deficits and a weak currency. The excruciating policy inertia and parliamentary logjam are only adding to the frustration.

The IT index was the only notable gainer. The index was up ~1% owing to weakness in the rupee. The Indian currency eased further today, weighed down by suspected dollar demand from domestic oil refiners and a worsening macro-economic picture. The rupee was last trading at 52.63 to the dollar after being as low as 52.68. It opened at 52.15 versus Friday's close of 52.0425.

The major laggard was the BSE Metal index. It was down 4.2%. The Oil & Gas index was down 3%, while the BSE Banking index fell 3% and the BSE Realty index declined 2.9%.

The BSE Small-Cap index and the BSE Mid-Cap index ended lower by ~1.5% and ~2%, respectively.

Finally, the BSE Sensex ended at 15,870, down 343 points. It had earlier touched a day's high of 16,360 and a day's low of 15,840. It opened at 16,354. The NSE Nifty closed at 4,765, down 102 points.

Tata Power, Hindalco, SAIL, J P Associat, Jindal Steel, SBIN, IDFC, DLF, PNB, Bharti Airtel, Reliance Comm, ACC, Ambuja Cement, Coal India, Reliance, Grasim and HDFC Bank are among the laggards.

While, Wipro, TCS, HCL Tech and Infosys are among the leading gainers on the BSE and NSE.

"Inflation for November will be in focus on Dec. 14. The RBI will review its policy on Dec. 16. Although it has already signaled a pause, the markets will take further cues from the central bank’s statement. The FOMC policy meet, latest advance tax numbers and parliament proceedings (or the lack of it) are the other important events to keep an eye on," says Amar Ambani, Head of Research, IIFL.

Globally, European stocks fell today after Moody’s Investors Service said measures announced at last week’s EU summit won’t be enough to take pressure off euro-area sovereigns.

Moody’s said that it will still review the ratings of all EU countries during the first quarter of next year.

Most Asian indices finished higher today led by Japan, South Korea and Australia. However, benchmarks in China closed 1% down while that in Hong Kong too slipped from session highs.

In currencies, the US dollar gained against major rivals, with the dollar index almost touching the 79 mark on fears of possible ratings downgrades in Europe. The euro was trading lower versus the greenback.

Wall Street and European markets had rallied on Friday as investors welcomed the EU pact for stricter budget controls and US consumer sentiment hit six-month peak this month.