Weak IIP data wipe out early market gains

Analysts said that the industrial output figures were a big disappointment for the market. According to data released by the government, the growth in index of industrial production (IIP) slipped to 5.3 per cent in January 2008 compared with 11.6 per cent in January 2007, the lowest since October 2006, when it stood at 4.51 per cent. Growth in the manufacturing sector declined to 5.9 per cent in January 2008 against 12.3 per cent in January 2007.

The next trigger for the market would come from the figures of advance tax payment by corporates for the fourth installment, which is due on March 15. The market’s confidence has been battered this year by fears of spreading global credit problems, the increasing chances of a US recession, rising inflation and worries of foreigners selling shareholdings.

However, top counters gained ground during the day. ICICI Bank gained nearly 3 per cent, while smaller rival HDFC Bank Ltd rose 2.7 per cent. Reliance Industries rose 1.3 per cent as investors bet on strong earnings led by its refining, exploration and production businesses.

It was uncertainty about the health of the financial sector that erased some of the euphoria over the Fed’s moves to ease credit market stress, although European and Asian stocks didi put in solid gains. Deep concerns among investors about the threat of another round of last year’s credit crisis were at least temporarily assuaged on Tuesday when the US Federal Reserve said it would allow financial firms to swap securities backed by home mortgages for some $200 billion in Treasury bonds.

This was supported by other liquidity-inducing efforts by the European Central Bank (ECB), Bank of Canada, Bank of England and Swiss National Bank. The moves spurred the S&P 500 index of leading US stocks to its biggest daily gain since October 2005 with a 3.71 per cent rise, a mood that continued to spill over into Asia and Europe today.