The Hindu Business Line : Bears run over stocks on slower industrial growth

The bears appear to hit upon new reasons to pull the market down. If the cash reserve ratio (CRR) hike was the motivation on Monday then domestic industrial production output numbers appeared to strengthen the bear's case on Tuesday.

While the indices opened with confidence after Monday's ravage, they soon demonstrated weakness with selling pressure at its peak by mid-day. While there was some recovery towards close, the bears had made their mark and this was reflected in declining stocks outnumbering the advances by a ratio of 5.5:1.

The Asian markets also failed to give any clear signals as they closed a mixed bag.

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Earlier in the day, the cooling-off of domestic industrial sector growth appeared to trigger pessimism. The index of industrial production (IIP) grew just 6.2 per cent in October 2006 compared to 9.8 per cent in October 2005. This was also lesser than 11.4 per cent growth this September. The manufacturing segment, which has the highest weightage in IIP, grew 6 per cent as against 11.9 per cent in the corresponding period last year.

Turnover at the NSE was Rs 11,085 crore, higher than the last few days' average. It was Rs 9,344 crore on Monday. Stocks such as Reliance Communications, Steel Authority of India, Zee Telefilms and India Cements witnessed huge volumes on the back of selling pressure.

Sector focus

The decline in growth rates of the manufacturing segment of the IIP appeared to have triggered negative signals in the capital goods sector. The BSE Capital Goods Index, with a decline of 4.1 per cent, was one of the worst hit among the sector indices. ABB lost about 8.5 per cent followed by Siemens and Punj Lloyd.

Larsen & Toubro also slipped 3 per cent as its Rs 5,400-crore order under the Delhi Airport modernisation contract failed to create much impact in the market.

Banks continued their downtrend triggered by the hikes in CRR by the RBI. State Bank of India was among the worst hit as it lost 5 per cent. Among the mid-cap stocks, Union Bank of India, Canara Bank and Bank of India lost over 10 per cent.

Although known to be defensive bets, the IT space was no exception to the market weakness, albeit the scale of decline was relatively less.

While heavyweights Satyam Computer Services, Infosys and Wipro lost 1-2 per cent, Polaris Software, Rolta and MphasiS BFL were some of the major losers in the mid-cap segment.

Stock-specific news

Vertex Spinning hit the upper circuit filter to close at Rs 59. The company later announced an approval to acquire Green Collage & Resorts to create a 100 per cent wholly owned subsidiary to start business in construction, infrastructure and real estate.

Post-market session, Finolex Cables announced the splitting of its Rs 10 share into 5 shares of Rs 2 each.

Shriram Transport Finance, Tulip IT Services, Bank of Maharashtra, Marico and Vimta Labs were among stocks traded at the NSE that managed to hold ground and move up.

Some of the newly listed stocks such as Blue Bird, Parsvnath Developers and GMR Infrastructure took a hit. NDTV, Action Construction Equipment and Bajaj Hindusthan were other conspicuous losers at the NSE.