Markets shrug off firm IIP, Sensex slips 220pts

The markets declined as investors remained cautious over murky global outlook and expectations that the Reserve Bank of India would continue to hike rates after better than expected industrial output data.

The Nifty opened in the green and touched a high of 5,195 tracking firm global cues. The index wilted under selling pressure after the industrial output data came in higher than expected; stoking expectations that RBI may continue with its tightening process. The index made a low of 5,053 in the noon session. The Nifty finally closed at 5,073, down 65 points and the Sensex ended at 16,840, down 220 points.

The Industrial Output data for June was reported at 8.8%, higher than expected at 5.5%, which flagged concerns that the RBI would hike rates by another 25 bps in September as growth in the short-term remained sturdy. The IIP data was much higher than 5.9% reported in May. Nomura in a research note said, “IIP jumped, due to a sharp rebound in capital goods production. Excluding capital goods, industrial output growth weakened further.”

Analysts said that Indian markets could see another round of sell-off due to weak global cues. A K Prabhakar, Senior Vice President Equity Research, Anand Rathi said, “Nifty can drop below 4,780 in the coming days."

Markets in Asia ended a volatile week on a mixed note. Japan's Nikkei Stock Average fell 0.5%, South Korea's Kospi Composite fell 0.8%, Hong Kong's Hang Seng Index added 1.1% and China's Shanghai Composite was up 0.5%.

Back in India, BSE Banking index was the top loser, down 1.6%. Losers from the banking space were. Kotak Mahindra Bank was down 2.7%, State Bank of India slipped 2.5% and HDFC Bank was down 2.3%.

BSE IT index slipped 2.7% after the small rebound seen mid-week. Top losers were Wipro, off 2.9%. TCS down 2.7% and Infosys dipped 2.6%. Prabhakar said frontline IT shares would remain weak for some time due to worries over global growth and rising salary.

Among individual stocks Tata Steel June quarter net profit more than tripled to Rs 1,340 crore led by stronger volumes and better prices in Europe and one off gain from stake sale. The stock ended at at Rs 476, down 1.7%.

Tata Motors was the top loser on Sensex, down 5.3% after it posted lower than expected June quarter results and several big brokerages like CLSA downgraded the stock.

Top losers on the Sensex were Hindalco, down 4%, JP Associates slipped 3.3% and Tata Power was down 3.1%. Prominent gainers were Jindal Steel, up 2.6%, Mahindra & Mahindra added 1.8% and Hero Motors added 1.8%.

Market breadth was negative, 1,257 stocks advanced for 1,569 stocks which declined.