On Tuesday 12 July 2011, Perturbing domestic developments amidst daunting global set up blemished the trade at Dalal Street on Tuesday. A three pronged reason led the massacre, firstly it was the muted earnings number by the IT major- Infosys, the company's sale forecast too missed the street estimates, pulling shares of Indian software exporters lower fuelling concerns that customers are holding off on new contracts because of uncertainties in the global economy. India's second-largest code writer estimated sales in the year to March to range from $7.1 billion to $7.3 billion. Meanwhile, also lugged the benchmarks lower was the sluggish growth of May IIP which came at 5.6% as compared to 6.3% (MoM) basis, much below the expectations of 8.5%. As per the official data, IIP for April-May 2011 stood at 5.7% which is less than the 10.8% achieved last year in the same, what bothered investor's was the reports stating that these numbers are unlikely to influence the apex bank's action, which is more concerned for controlling inflation right now, signaling potential rate hike in the upcoming monetary policy review on July 26, 2011. Additionally, the fears that euro zone debt crisis is spreading to much larger countries like Italy and Spain, stoke fears that the aid from international lenders may not be enough to stop a broad deterioration of the European economy, also casted its shadow over Indian equity markets.
1) The BSE Sensex plunged 309.77 points or 1.65% and settled at 18,411.62 and NSE Nifty fell 89.95 points or 1.60% to settle at 5526.15. The other two broader indices BSE Mid-cap index lost 1.09% while Small-cap index lost 0.94%. On the BSE Sectoral front, there were no gainers. On the other hand, IT down 2.74%, Realty down 2.68%, Teck down 2.41%, Auto down 2.25% and Consumer Durables down 2.19% were the top losers.
2) On the global front, US stocks suffered their worst day in nearly a month on Monday as concern about the stalemate in US budget talks and growing debt problems in the euro zone prompted investors to hedge against further losses. Meanwhile, Hong Kong and South Korean stocks tumbled to lead Asian markets lower on Tuesday as qualms about spreading European debt troubles rattled investors, hitting financial shares and exporters especially hard. The European shares dropped sharply on Tuesday, extending losses into a third session and nearing their 2011 lows as euro zone politicians struggled to contain Greece's debt crisis and stop it spreading to Italy and Spain.
3) Meanwhile, Industrial growth has slowed down in the month of May. Index of Industrial Production (IIP) has come in at 5.6% on a year-on-year basis. However, the market expected it to be at 8.6%. The lower than expected growth is due to the poor performance of manufacturing and mining output. On the other hand, industrial output for the first two months of current financial year also reduced significantly. As per the official data, Index of Industrial Production (IIP) for April-May 2011 stood at 5.7% which is less than the 10.8% achieved last year in the same period. This moderation in industrial growth is viewed as negative effects of increased interest rate, and input costs.
