Updated: Fri, 11 Jan 2013 21:30:00 GMT

Sensex closes week 0.6% lower

Indian stock markets had a lackluster outing today. The BSE Sensex closed flat while the NSE Nifty closed 17 points lower. Infosys and Wipro were the top gainers.

The Indian stock markets started the day on a strong positive note, with IT bellwether Infosys announcing flat quarterly profit growth, but upping its revenue guidance. Unlike Infosys, the markets could not hold on to the positive momentum. Post the morning session key indices started moving lower and finally closed at the dotted line towards the end of today's trade. The BSE-Sensex closed flat. The NSE-Nifty closed lower by around 17 points (down 0.3%). The smaller indices had a worse day on the bourses. The BSE MidCap index and the BSE-Small both closed over 1.5% lower. FMCG and Consumer Durables saw a bulk of the losses. IT stocks saw stellar gains with the relatively undervalued Infosys and Wipro leading the pack. FMCG and realty stocks saw some losses

As regards global markets, Asian indices had a mixed outing today. European indices also opened the day on a mixed note. The rupee was trading at Rs 54.79 to the dollar at the time of writing.

Maybe the Reserve Bank of India (RBI) will strongly consider a rate cut in its January 29th review, seeing that, industrial production has contracted to a 4-month low of 0.1% in November 2012. This decline in the Index of Industrial Production (IIP) data was due to the poor performance of manufacturing and mining sectors and decline in production of capital goods. This poor data is as compared to a robust 8.3% growth seen in October 2012 and compared to a 6% growth seen in November, 2011. Factory output growth was 1% in April-November period this fiscal, down from 3.8% in the same period in 2011-12, according to official data. The manufacturing sector, constituting over 75% of the index, grew by meagre 0.3% in November in 2012, as against a 6.6% in 2011 which is quite disturbing.

Indian car sales are set to post their slowest growth in 9 years this fiscal as high interest rates in the economy and slower GDP growth continue to weigh on the industry. The passenger vehicle segment is expected to grow by only 1% while commercial vehicles (CVs) are predicted to show a negative growth during FY13. This impact is also being felt on the allied tyre industry. The sector has already reduced its inventory as it has been struggling with muted demand almost throughout the year. Tyre companies are now only keeping a lower inventory stretching to 3 weeks compared with 2 months of inventory earlier. Original equipment segment has been extremely disappointing this year, while replacement demand has fared slightly better. However, interest rate cuts and a revival in the manufacturing and mining sector may herald a revival. Plus, although international prices have moved up, major markets including the US and Europe have not seen much growth due to sluggish demand. MRF, Apollo Tyres, Dunlop India and JK Tyre closed the day lower.

By Equitymaster – India's leading 'independent' equity research initiative. Trusted by over a million members all over the world, Equitymaster, with its well-researched, unbiased and honest opinions is the preferred destination for investors interested in long term investments.

Copyright © Equitymaster Agora Research Private Limited

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