Disappointing IIP data, global cues drag Nifty below 6100

The 30-share BSE Sensex shed 136 points on Tuesday post disappointing Index of Industrial Production (IIP) data and due to weak global cues. Capital goods, realty, metal, cement, power and FMCG companies' shares along with heavyweights like Reliance Industries, SBI and Bharti Airtel dragged the Nifty below 6100 for the first time in last eight sessions. However, benchmarks showed some recovery in last one hour of trade - the Sensex recovered 96 points from day's low backed by auto and select healthcare companies' shares along with TCS, Reliance Communications and ICICI Bank.

The index of industrial production plummeted to single digits in August 2010 at 5.6% from 15.2% last month and 10.6% a year back. This drastic fall was backed by the contraction in capital goods and non-consumer durables.

Samiran Chakrabarty, Head of Research, StanChart says, "The breadth of industrial production has been pretty weak this time. I am slightly surprised by the consumer non-durables number and the general trend of almost a whole year of very anemic growth. Are we missing something here, because anecdotal evidence doesn't suggest that consumer non-durables are growing at such a low pace."

"The July number was an aberration at 15%. We are now back to where we should have been because if you average out the July and the August numbers then what you get is where IIP should be which is somewhere between that 8-10% range where I guess industry is growing," he said.

During the month, manufacturing sector has achieved a growth of 5.9%, mining sector at 7% and consumer goods grew at 6.9% versus 10.6%, 11% and 10.9% (YoY), respectively.

However, key sector capital goods growth has fallen as low as 2.6% (YoY) and consumer non-durable growth has slipped, a recording low of 1.2% (YoY).