Markets retreat on poor IIP nos; metal, banks, IT stocks crash

12 August 2008

Markets retreated and ended sharply lower on the back of profit booking, disappointing IIP numbers, and negative European and Asian cues. Sell off was seen in rate sensitives, infrastructure, technology, metal and pharma stocks. Midcap and smallcap stocks were also under selling pressure. Nifty Fifty slipped below 4600 mark.

The Sensex closed at 15,212.13, down 291.79 points or 1.88% after hitting an intraday high of 15,579.78 and low of 15,124.91. Nifty ended with a loss of 68.15 points or 1.47% at 4552.25. It has touched a high/low of 4649.85 and 4525.75, respectively.

IIP numbers have disappointed markets. June industrial growth stands at 5.4% versus 8.9% (YoY) versus 4.1% in May, which was below CNBC-TV18 estimated figure of 5.95%. Electricity, capital goods and basic goods were the key culprits. Electricity growth fell to 2.6% versus 6.8%; Capital goods growth has come down to 5.6% from 23.1% YoY. Infrastructure output number stands at 3.4% versus 5.2% (YoY). May industrial growth has been revised to 4.1% versus 3.8% earlier.

Mridul Sagar, Chief Economist at Kotak Securities, said he sees 7-7.5% GDP growth in FY09. He sees investment demand slowing down, which will put pressure on growth.

While A Prasanna, Chief Economist at ICICI Securities, sees FY09 IIP and GDP, both at 7.5%. He thinks the Reserve Bank of India or the RBI may be over with rate hikes, but not yet with CRR hikes. He believes the RBI is likely to be on hold for now.

Amongst frontliners, Tata Steel plunged 5.71%, Maruti Suzuki -5.23%, Jaiprakash Associates -4.58%, Sterlite Industries -4.46%, HDFC -4.27%, ICICI Bank -4.20% and Infosys Tech -3.98% while BPCL gained 2.05%, Siemens 1.67%, Cairn India 1.30%, ITC 0.98%, Reliance Ind 0.95%, Grasim 0.83% and M&M 0.75%.