Sensex down 1% on weak IIP, rising inflation

Higher than expected retail inflation figure and sharply lower than expected industrial production figure, announced on Thursday, pulled the markets down on Friday with the sensex and nifty both diving below their two-month lows. With the IT pack led by TCS, along with metal stocks including Vedanta and Hindalco dragging the sensex down, at 12pm, the index was down over 265 points, or 1%, at 25,602. Earlier in the day, the sensex had touched a low at 25,541, down 325 from its Wednesday close Stock Market Trading Tips

Economists, however, pointed out that the sharp drop in Index of Industrial Production ( IIP) was mainly due to the impact of the base effect of the previous year. "IIP growth declined to a 4-month low of 3.6% in September from 6.3% in August as an unfavourable base effect played out. Early Diwali had led to a pre-festive season spike in production levels in September last year," said a note by Jay Shankar, Chief India Economist, Religare Capital Markets. On the rise in consumer inflation to 5% in October, Religare said that it was mainly because of a spike in the prices of pulses, and this is unlikely to change RBI's expected monetary stance. 

Dealers also said that with the US Fed expected to raise rates in its December meet, some foreign institutions are slowly taking money off emerging markets including India, although most long term players are staying put. FPI outflows are having some negative impact on the market sentiment, they said Himanshu Tiwari Astrologer Blog