Markets Make Smart Comeback On Rate Cut Hopes

The Indian markets have made a smart comeback after the dismal IIP figures for Apr 2012. Both the benchmark indices are trading 0.6% up against the morning losses.

Earlier today, the IIP numbers for Apr were announced. At 0.1%, the figure was below the market's expectations. The only good part about the Apr numbers is that they are much better than the Mar 2012 numbers. The numbers came in positive due to the 5% growth in Consumer Durables. Capital Goods continued its negative run, declining by 16.3%. We believe that the falling IIP data definitely makes a case for a rate cut. Now, all eyes are set on the WPI date expected this week.

The other Asian indices are continuing to trade negative at this hour. The impact of the bailout of Spain has completely diminished from the markets.

The European markets have witnessed a flattish opening today, with DAX and FTSE almost flat and CAC marginally up.

Among the sectoral indices, apart from HC, Power and FMCG, all the other indices are trading up. The interest rate-sensitive indices such as Bankex have rallied by about 1.2%.

Among the Sensex stocks, Sterlite Industries is still trading higher. The stock is up by about 2%. State-owned bank SBI is up by 1.3%, and ICICI Bank and HDFC Bank are both also up about 1%. The shares of Auto companies like Maruti Suzuki, Hero MotoCorp, Bajaj Auto, M&M and Tata Motors are on the buyers’ radar. On the other hand, IT major Wipro's stocks have shown a 2% decline during the afternoon trades.

Of the other stocks, Pantaloon has surged by 5%. LIC and Allahabad Bank have both surged by 3%. Suzlon Energy has declined by 2% after the 45-day extension for its bond liability. Cummins India is also trading lower by 3%.

DLF stocks are up by 0.7% after the company's announcement that it has divested its entire shareholding in Adone Hotels for Rs 567 crore. Venus Remedies has surged up by 2.78% after it received a patent from the US patents office for one of its antibiotics.

The market breadth has turned mixed after the IIP data was announced.

We believe that the low IIP number has made some room for a rate cut, and the markets will hold its gains for the day on the same.