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Mid & small caps bleed
Fri, 11 Jul Closing

After trading weak in the post noon trading session, the Indian equity markets extended their losses and ended the day in the red. While the BSE-Sensex today closed lower by 348 points, the NSE-Nifty closed lower by 108 points. Midcaps and Smallcaps also bore the brunt of profit booking with both the BSE Mid Cap and BSE Small Cap indices recording losses of 2.8% and 3.3% respectively. Realty and Capital goods stocks were the biggest losers today.

As regards global markets, Asian indices closed on a weak note today. Only Singapore and Shanghai markets closed in the green. The rupee was trading at Rs 60.02 to the dollar at the time of writing.

Sugar stocks ended the day on a weak note. Except for Simbhaoli Sugars, all the sugar stocks ended the day in the red. As per estimation of Indian Sugar Mills Association (ISMA), the sugar production for the 2014-15 season is likely to be 4% higher than the previous season. ISMA estimates are based on cane acreage expectations across the country. Maharashtra and Karnataka are the two states that are likely to witness higher output. However, UP and Tamil Nadu may witness a slightly lower production. Considering the fact that sugarcane is a water intensive crop, it would be interesting to see if the production indeed increases from last season as predicted by ISMA. With monsoon deficiency being expected we would not be surprised if the actual production is below the intended target.

The Index for Industrial Production (IIP) figure for the month of May is expected to be in the range of 3.76% as compared to 3.41% in the same month previous year. Considering the fact that industrial production has remained sluggish in the recent past the figure is expected to be volatile. Capital goods, consumer durable, manufacturing, and minerals are key factors that drive IIP. With the new government committed to reducing infrastructure bottlenecks and reviving capex cycle we believe that the IIP growth is likely to revive in the future. However, apart from bureaucratic hassles interest rates also play a key role in the revival of industrial capex. So, if rates continue to remain high, the revival will take longer than expected.

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