Nifty ends lower on less-than-expected IIP data

The Nifty closed the day on a negative note on the back of less-than-expected IIP (index of industrial production) data and shrugged off positive global cues. Banking, telecom, oil & gas, realty and pharma stocks witnessed selling pressure while capital goods stocks along with Infosys, Reliance Infra, SAIL, JSPL, NTPC and Grasim saw buying interest.

The benchmark indices started the session higher on good global cues. The Nifty touched a new 18-month high of 5,182.55 during the day but the IIP data wiped out all early gains and the markets turned cautious with negative bias.

The October IIP grew by 10.3% in October 2009 as compared to 9.6% in September. The IIP growth rate in October 2008 was at 0.1%. A CNBC-TV18 poll saw the IIP growth rate at 12.5%. April-October industrial growth came in at 7.1% versus 4.3% (YoY).

Manufacturing sector growth came in at 11.1% as against (0.6%); mining sector growth at 8.2% versus 3.2% and capital goods growth came in at 12.2% versus 4.2% (YoY)

Sonal Verma of Nomura Financial Advisories and Securites sees a full year IIP at 9.5%. "Every Diwali we get surprised on the downside. If one accounts for that it continues to be a fairly strong domestic demand pick up except for that there was loss of working days. To that extent, production is low. Therefore, it has not come in as a big surprise."

On capital goods, she said, "are coming in at 12%, which is good, it comes on a low base of 4%. The kind of strength we had seen in September is not visible this month in capital goods. A lot of the existing infrastructure investment projects, which were put on hold, are now gaining traction. However, as far as new fresh capex is concerned, we are still about three-four months away from fresh investment cycle picking up. Overall, the pick-up in domestic demand story does not really change because of this number. For the full year we are expecting IIP to be at 9.5%."