What can a number do? A lot, especially if it contains anything letters such as IIP, GDP, CRR etc preceding it. Today was the day of one such number - the IIP. What did it do? It came out of the government bag and dragged down the markets meaningfully. The IIP which reflects the production activity of the country and is released on a monthly basis fell 5.7% signaling a falling output and lower industrial activity. This means that at least on the industrial production side, the growth overall for the entire year could be meaningfully lower than that of last year. Secondly, since the industrial activity is an important component of GDP this would also have an impact on GDP numbers being soft and so the vicious cycle of one number affecting the other has begun.
The market were quick to catch the bout of cold and went into a tizzy. Within no time we were all over the place with key names in the Nifty falling off and rubbing off onto another the selling momentum. The notable crashlings included L&T, JP Associates, all power companies, Steel companies real estate segment and to a meaningful extent Autos. Probably, IT and Pharma were kept out, since the first does not care what happens in India (they care more of what happens half way across the globe) and the second – no matter what would not face any difficulty selling pills and syringes to the folks.
Now the action would move over the Dr. Subbarao who would pull out anything worth pulling out from the hat to soothe the frayed nerves. This is expected to happen on the 16th of December 2011. But until that time, I would imagine that this selling frenzy could last a bit longer than envisaged. With alternate bouts of selling and cooling.
The market in all probability is headed for the amongst the worst yearly (calendar) close (barring 2008) for the past decade. So while all and sundry are gearing up for new years in a couple of weeks; am sure this part of the country (IB folks, brokers et al) are going to eat just bread & butter for Christmas.
However, hope floats eternal in the land called India. 2012 is a fresh year for business.
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