Sensex dips as IIP, Tata Motors earnings disappoint

The Indian stock markets ended with minor losses after industrial production for the month of June unexpectedly shrank as against expectations of a marginal increase. The frontline Indian equity benchmarks had advanced modestly in the early minutes of trade, with the Sensex hitting 17,700 and the Nifty trading above the 5,350 mark. Both the main indices rose by ~0.5% each in opening deals. However, sluggish European markets and sustained selling pressure in index heavyweights such as SBI, Bharti Airtel, HDFC, Reliance Industries and Wipro dragged the benchmarks to day's low in late trade. The sentiment was hit by a weaker-than-expected IIP data for June and disappointing results from auto giant Tata Motors. Shares of Bharti Airtel remained under pressure for a second straight session after the telecom major delivered weak Q1 earnings. Banking titan SBI was down sharply ahead of its results on Friday. HDFC was too was a notable loser today, along with Wipro, RIL, BPCL and Ranbaxy. Ranbaxy shares fell after the company swung to a loss in the April-June quarter. Cairn India’s stock was down after its CEO said he will step down at the end of this month. On the brighter side, M&M gained for a second straight day following strong Q1 results. FMCG majors HUL and ITC advanced despite IIP data showing a drop in consumer non-durables output in June. L&T too rose, notwithstanding a sharp fall in the capital goods production in June. The Sensex ended at 17,560, losing by 39 points or ~0.2% over the previous close. It had earlier touched a day’s high of 17,702 and a day’s low of 17,516. It opened at 17,612. The NSE Nifty settled at 5,323, down 15 points or 0.3% from the previous close. It touched a day’s low of 5,312 and a day’s high of 5,368. It opened at 5,348. Bharti Airtel, SBI, HDFC, BPCL, Ranbaxy, Cairn, Bank of Baroda, SAIL, Siemens, Reliance Industries and Wipro were among the notable losers in the Sensex and the Nifty. M&M, Ster, Hindustan Unilever, Tata Power, Coal India, Sesa Goa and Grasim were the top gainers in the Sensex and the Nifty. Among the sectoral indices, FMCG was the only index with gains above 1%. It was followed by Metals, Auto, Power and Capital Goods indices. On the other hand, Oil & Gas index was the only index with losses of 1%. It was followed by Teck, Banking, PSU, Consumer Durables and Realty indices. IT and Pharma indices closed nearly unchanged. Among the broader markets, losses on the BSE Small-Cap index were slightly higher at 0.4%. The BSE Mid-Cap index fared almost in line with the Sensex and ended down 0.26%. The INDIA VIX on NSE ended at 16.33, down 0.25%. It hit a day’s high of 16.77 and a day’s low of 16.04. The market breadth on the BSE was negative, with 1613 stocks ending lower and 1165 stocks closing higher. On the BSE-500, HEG, Ess Dee Aluminium, SKS Microfinance, Bajaj Finserv and Apollo Tyres were the top gainers. MVL, Amtek Auto, Aurobindo Pharma, Bharti Airtel, Pantaloon Retail, United Breweries Holdings and Idea Cellular were the top losers in the broader market. "The recent rally appears to be losing steam. Any material gains from here on are contingent upon the Centre walking the talk on reforms. Reports say there is very little consensus among states on allowing FDI in multi-brand retail. News of an impending diesel price hike has been doing the rounds for a quite a while as well. The UPA II’s resolve on reforms will also be tested in the ongoing monsoon session of parliament. A spate of private research outfits have slashed India’s FY13 GDP growth forecast. A failed southwest monsoon has added to the long list of macro-economic problems. Data on credit offtake, deposit mobilisation and overseas borrowings is pretty bleak. IIP data for June was also disappointing. But, FIIs continue to pump money into Indian equities. Further selling is not ruled out if the Nifty closes below 5300," says Amar Ambani, Head of Research, IIFL. India's industrial production surprisingly contracted in the month of June, undermined by dwindling investments in a sharply slowing economy, government data showed today. The combined output of Factories, Mines and Power Utilities, as measured by the index of industrial production (IIP), shrank by 1.8% in June 2012 as against a revised 2.5% expansion in May 2012, the Commerce Ministry said today. The IIP had expanded by an impressive 9.5% in June 2011. Economists had forecast an increase of ~1% in June 2012. Globally, Asian stock indices closed mostly higher amid mounting hopes of policy intervention by the world's leading central banks in order to revive economic growth and ward off the threat emanating from the long-running European credit crisis. Equity benchmarks in Japan and Hong Kong rose by ~1% each while that in China was up 0.6%. The Kospi in South Korea was up ~2% while the Taiex in Taiwan advanced 1.5%. Markets in Singapore and Australia closed lower. China's consumer inflation fell to a 30-month low in July, stoking hopes of further monetary easing by the central bank as it looks to avoid a hard landing amid lingering concern about the ongoing eurozone debt crisis. The consumer price index (CPI) rose 1.8% last month compared with a 2.2% rise in June, official data released on Thursday showed. That is a big pullback from a three-year high last July of 6.5%. Economists had forecast a reading of 1.7% in July. Separately, the Bank of Japan (BOJ) on Thursday left its monetary policy unchanged amid nagging concern about the adverse fallout of the eurozone debt crisis and a stronger yen on the world's third-largest economy. European shares rose towards five-month highs while the euro held steady as weak Chinese economic data raised optimism about further monetary easing by leading central banks. The Stoxx Europe 600 index rose 0.2% after barely closing higher for a fourth straight session on Tuesday. Government data showed today a drop in consumer inflation to a two-and-a-half-years low while industrial production and retail sales came in lower than forecast, leaving the door open for further monetary easing. Stock indices across major European markets were trading essentially flat.