Key Numbers Take Market Lower

The Indian markets closed one of its busiest days on a negative note today. The day started with a disappointment from the IT bellwether Infosys' Sept quarter results. Following this, the IIP data for the month of Aug 2012 and CPI data for Sept 2012 were released. Lastly, banking major HDFC Bank posted its usual good set of numbers.

Among the sectoral indices, IT and Teck were the leading losers, lower by 2.59% and 2.26% respectively. Other indices like Realty, Auto and Capital Goods also closed in the negatives. On the other hand, the Consumer Durables, Healthcare and FMCG indices which closed the day higher.

The day started on a bad note, with Infosys just meeting the street's expectations in terms of results. However, the company lowered its EPS guidance to Rs 160.61 from previous estimates of Rs 166.46. A lower EPS target coupled with the fact that V. Balakrishnan will be giving up his position as CFO from Oct 31, 2012 saw the Infosys shares plunge lower by 5.36% to Rs 2395.65 per share.

Around noon, the markets saw the IIP data coming in, which stood at 2.7% for Aug 2012 as against the street's expectations of around 1%. For the month of July, the data was revised to -0.2% from the previous number of 0.1%. In the Apr-Aug period, the industrial production expanded by an annual 0.4%. With the IIP figure on the higher side and inflation still remaining a major concern, it is expected that the RBI will maintain status quo in its next monetary meet. A lower possibility of a rate cut took the markets further southwards.

HDFC Bank came out with robust set of Sept quarter numbers. The net profit of the bank grew by 30% to Rs 1560 crore, while the net NPA and NIM remained stable at 0.2% and 4.2% respectively. The markets did not return to the green despite a good set of numbers from the banking major, as the numbers were already discounted.

The CPI data for the month of Sept 2012 came in at 9.73% as compared to 10.03% for Aug 2012, after a marginal fall in fuel and food prices. Usually, the WPI data is released and then followed by the CPI data for the same month. With the CPI coming slightly lower on a month-on-month basis, there is a possibility that the WPI for Sept might also be lower. However, we at Dalal Street Investment Journal are surprised to see the CPI on the lower end, and despite it coming in a few basis points lower, we still don’t expect the RBI to cut the rates.

The other Asian markets saw mixed results. While Hang Seng and Shanghai closed the day higher by 0.65% and 0.1% respectively, the Japanese Nikkei finished lower by 0.15%. A Bloomberg report said that China’s biggest banks are resisting government pressure to lower borrowing costs amid an economic slowdown, as they seek to maintain the profitability of their lending operations.

European indices are currently trading lower, with FTSE, CAC and DAX are down in the range of 0.1%-0.3%. Reports say that the Euro region's industrial production unexpectedly increased for the second consecutive month in Aug, led by rising output in countries including Italy and France.

Dow Jones Futures is currently trading lower by 7.5 points or 0.06% at 13345, indicating a negative sentiment in the US markets.

Back home, Bharti Airtel closed lower 2.58% at Rs 260.30 per share. Other stocks like BHEL, Wipro, Hero MotoCorp, ICICI Bank and Tata Motors were lower in the range of 1%-2.5%. Similarly, RIL, Hindalco, Jindal Steel and SBI closed lower in the negative territory.

On the flip side, GAIL India was the leading index gainer, up by 1.16% at Rs 379.35 per share. Other stocks like Cipla, HDFC Bank, TCS and HUL closed higher in the range of 0.6%-1.1%. ITC, L&T, Tata Steel, etc. were among the stocks marginally in the green zone.

The market breadth, which indicates the overall health of the market, was on the negative side. Out of the 3020 stocks traded on the BSE, 1514 declined, 1372 advanced and 134 remained unchanged.

We expect the markets to remain volatile for the next week as we have the WPI data for the month of Sept 2012 releasing on Oct 15. Further, we will also see companies like Axis Bank, Reliance Industries, CRISIL, HCL Tech, ACC, Ambuja Cements, IFCI, ITC, TCS, etc. declaring their Sept quarter numbers.