IIP, WPI - Ends The Week, Investors Eye RBI And CPI

DSIJ Intelligence / 15 Jun 2012

On the domestic front, the week had two releases of major data viz. the Index of Industrial Production (IIP) and the Wholesale Price Index (WPI) Inflation, both keeping the market a little nervous since they were below expectation.
On the domestic front, the week had two releases of major data viz. the Index of Industrial Production (IIP) and the Wholesale Price Index (WPI) Inflation, both keeping the market a little nervous since they were below expectation. However, the broader indices inched higher by almost 1.4 per cent on the hope that this might make the RBI slash the rates in its monetary policy next week. Further, the markets also received a warning from the leading global rating agency S&P which has said that India could be the first BRIC’s ‘fallen angel’. 

Benchmark Indices
Index8-Jun-1215-Jun-12% Change
SENSEX 16718.87 16949.83 1.38
NIFTY 5068.35 5139.05 1.39
Hang Seng 18502.34 19234 3.95
Nikkei 8459.26 8569 1.30
Shanghai 2281.45 2416 5.90
Dow Jones* 12414.79 12652 1.91
S&P 500* 1315.13 1329 1.05
NASDAQ* 2844.71 2836 -0.31
Bovespa* 52481.44 55351.67 5.47
FTSE* 5447.9 5467 0.35
DAX* 6144.22 6139 -0.08
CAC* 3047.37 3033 -0.47
* closing till Thursday

The IIP data for April was released on Tuesday which came in at a meager 0.1 per cent against the street expectations of anywhere in the range of 1.2 to 2 per cent. For the month of April 2012, mining showed a negative growth of 3.1 per cent as against the same period last year while the manufacturing and electricity sectors for April posted growth of 0.1 cent and 4.6 per cent. The finance minister expressed his disappointment over the dismal numbers and said that the ministry would take steps to beam positive signals in the economy. 

A day after that, on Thursday, the Wholesale Price Index (WPI) Inflation for May came in at 7.55 per cent, higher than 7.23 per cent in April. What was more shocking was that the March inflation figure was revised to 7.69 from the previous estimate of 6.89 per cent. During the week S&P also came out with its report titled ‘Will India Be The First BRIC’s Fallen Angel?’ which stated that the slowing GDP growth and the political roadblocks to economic policy-making could put India at a risk of losing its investment grade rating.

On the global front, the week started with the big bang as the euro region’s finance ministers agreed to bail out Spain for up to Euro 100 billion. One should note that previously Greece, Ireland and Portugal have all taken bail-outs and Spain would be the fourth European country to do so. However, even after a day of this bail-out the Spanish bond market remained weak and the Spanish bond yield moved higher breaching the 7 per cent level. Further, media reports suggested that Italy’s economy is also under the pain and that things could go from bad to worse. With this the European markets closed with a mixed bag, moving marginally either side. 

The U.S. markets, namely Dow Jones and S&P, closed higher by 1.91 and 1.05 per cent while Nasdaq closed down marginally by 0.31 per cent. Investors in the developed markets have set their sights on the election results in Greece scheduled for June 17 as well as the Fed Open Market Committee meet on June 19 and to take further cues from the same. Investors are speculating that the central banks might take a dovish stance and probably will take some steps to stimulate the global economy. 

The other Asian markets also closed the week higher with all the three major indices closing higher. Shanghai closed the week higher by almost 6 per cent on the back of China reducing its key rates in the past week. On the other hand, Bank of Japan (BOJ) refrained from expanding the monetary stimulus. Among other things, the Hong Kong Exchange agreed to pay around USD 2.15 billion for the London Metal Exchange (LME), which is the world’s largest metal market place. Hong Kong would help the LME expand in China, the world’s biggest metal buyer.

Now all eyes are on the RBI’s monetary meet scheduled for Monday, June 18. In this scenario it would be very challenging for the RBI to choose between growth and inflation. One should further note that a 25 basis points’ cut in the repo rate and CRR each is already factored into the market. We believe that the RBI should maintain a status quo in its meet as inflation is still above the comfort zone and if that happens one may see the broader markets moving southwards by about 2 to 3 per cent. 

Sectoral Indices
Category/Index8-Jun-1215-Jun-12% Change
Broad
MIDCAP 5,988.21 5,953.75 -0.58
SMLCAP 6,326.14 6,351.73 0.40
BSE-100 5,073.30 5,131.17 1.14
BSE-200 2,053.81 2,074.66 1.02
BSE-500 6,429.05 6,486.65 0.90
Sectors
AUTO 9,192.24 9,205.68 0.15
BANKEX 11,513.80 11,579.94 0.57
CD 6,031.83 6,120.64 1.47
CG 9,485.64 9,535.36 0.52
FMCG 4,680.77 4,841.50 3.43
HC 6,634.98 6,583.70 -0.77
IT 5,617.05 5,768.28 2.69
METAL 10,308.14 10,387.87 0.77
OIL&GAS 7,780.76 7,821.14 0.52
POWER 1,877.07 1,865.77 -0.60
PSU 6,921.76 6,997.66 1.10
REALTY 1,650.86 1,620.56 -1.84
TECk 3,266.54 3,343.56 2.36

Back home, defensive bets are the investors’ favourite in an uncertain economic scenario, which is evident from the fact that the BSE FMCG closed this week higher by almost 3.5 per cent. The IT and teck indices closed the week higher by more than 2 per cent after the rupee depreciated further by 0.72 per cent to Rs 55.763 per dollar. Investors hope that a weaker rupee will further benefit the IT companies as they could see good bottomline growth in their books. While on the other hand, realty, power and healthcare indices closed this week lower in the range of 0.6 to 1.9 per cent. 

Top Gainers/Losers
GainersCMP% Change (WoW)LosersCMP% Change (WoW)
Ambuja Cem 167.8 11.09  Adani Port 115 -7.63 
Piram.Heal 485.5 10.03  Godrej Ind 231.35 -7.26 
United Spi 687.55 9.70  PidiliteIn 162.35 -6.83 
MMTC 752.05 8.90  Oberoi Rea 242.55 -6.35 
PFC 168.05 8.81  Lupin 513.55 -5.96 
Grasim Ind 2485 7.54  UNITECH 21.5 -5.70 
SyndicateB 103.45 6.76  OptoCircui 145.7 -5.63 
Dabur Indi 110.55 6.55  EicherMoto 2066 -4.95 
ACC 1218.65 6.24  Apollo Hsp 635.1 -4.56 
Indian Ban 180.8 6.23  MphasiS 339.2 -4.37 

Among the individual stocks, most of the cement stocks inched higher this week after the companies in the sector reported a good set of dispatch numbers for May. One of the leading gainers was Ambuja Cement which closed the week higher by almost 11 per cent. United Spirits closed the week higher by almost 10 per cent (surged today by 5 per cent) after the news that Credit Suisse (Singapore) has acquired a stake in the company for Rs 62 crore through a bulk deal. Other banking stocks like Syndicate Bank and Indian Bank also closed higher by 6.76 and 6.23 per cent after investors speculated about an interest rate cut on Monday’s monetary meet. The other gainers include stocks like Piramal Healthcare, MMTC, PFC, Dabur India, etc moving higher in the range of 6.5 to 10 per cent.   

On the other hand, Adani Port was among the leading index loser that closed the week lower by 7.63 per cent at Rs 115 on the back of news that the company is examining a possible deal to buy the export terminal at Dhamra Port in Orissa. Other stocks like Godrej Industries, Pidilite Industries, Lupin, Unitech, etc closed the week lower in the range of 6 to 7.5 per cent.  

The fertilizers’ stocks this week were more volatile on the back of major news about the urea price hike. The shares of fertilizer companies during the week traded higher but later gave up most of their gains as the government deferred the fertilizer ministry’s proposal to hike the retail prices of urea by 10 per cent for fiscal 2012-13. 

In conclusion, we expect the markets to remain volatile for the next week as we have a series of events lined up on the domestic as well as on the international front. The RBI monetary policy and Consumer Price Index numbers would be released on June 18 while on the macro front the outcome of the election results of Greece on June 17 and the Fed Open Market Committee meet on June 19 could also drive the market in either direction. We advise investors to remain cautious and adopt a ‘wait and watch’ approach and take cues from all these major events. 

Lastly, according to the latest media reports all UPA allies have nominated Pranab Mukherjee for the President candidate and hence if this comes true than Investors should wait, as to see who will be the next Finance Minister (FM) for the country. 

Key Global Indicators
Index8-Jun-1215-Jun-12% Change
Gold 29,341 30,129 2.69
Silver 53,849 54,599 1.39
Crude Oil (Brent) 97.86 97.63 -0.24
Crude Oil (Nymex) 82.31 84.69 2.89

Currency Rate
Index8-Jun-1215-Jun-12% Change
USD 55.364 55.763 0.72
EURO 69.2125 70.4411 1.78
GBP 85.6398 86.6892 1.23
JYP (per 100) 69.88 70.69 1.16

Institutional Turnover (Rs / Cr)
DateFIIDII
8-Jun-12 202.01 -81.48
11-Jun-12 130.39 -214.66
12-Jun-12 -56.6 -54.21
13-Jun-12 217.67 76.86
14-Jun-12 105.08 -282.83
Total 598.55 -556.32

Volumes (Rs.cr)
DateBSENSE
8-Jun-12 1971 9741
11-Jun-12 1947 9620
12-Jun-12 1963 9477
13-Jun-12 2118 9734
14-Jun-12 1773 8457

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