The Telegraph
Tuesday , February 4 , 2014
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Growth fear hits stocks

Mumbai, Feb. 3: Stocks wobbled again on Monday sending the bellwether Sensex tumbling by another 304 points as worries about growth in India and China were accentuated by new data that emerged over the weekend.

The Sensex fell to an 11-week low when it closed at 20209.26 as skittish foreign investors started to sell stocks in a nervous bout of trading.

On Friday, the Centre had said the economy had grown only 4.5 per cent in the year ended March 31 last year and not the 5 per cent it had estimated earlier. It was the weakest growth rate that the country has seen since 2003.

On January 28, the RBI had forecast that growth this year would “fall somewhat short of the Reserve Bank's earlier projection of 5 per cent,” and went on to add GDP growth in 2014-15 was “likely to be in the range of 5 to 6 per cent, with risks balanced around the central estimate of 5.5 per cent”.

This effectively means that the Indian economy will have to brace for three consecutive years of insipid growth.

There was bad news for China as well as its HSBC/Markit Purchasing Managers’ Index (PMI) sank to a six-month low of 49.5 in January, suggesting the overall factory sector contracted from December.

The index, which fell 1.48 per cent on Monday, has fallen for the sixth time in seven trading sessions.

The wider 50-scrip Nifty of the National Stock Exchange (NSE) closed 87.70 points, or 1.44 per cent, down at 6001.80 points.

HDFC, Infosys, ICICI Bank and Tata Motors were among the biggest losers. Eleven of the 12 sectoral indices closed with losses.

Investors largely ignored the HSBC PMI data, which showed that Indian manufacturing was running at its strongest pace since March 2013.

The HSBC India Manufacturing Purchasing Managers’ Index (PMI) — a measure of factory production — stood at 51.4 in January, up from 50.7 in December.

India’s manufacturing sector activity expanded for the third consecutive month in January. A PMI reading of above 50 differentiates growth from contraction.

“Manufacturing activity moved into higher gear led by faster growth in new orders,” said HSBC chief economist for India & Asean Leif Eskesen.

But one reason for glossing over the HSBC data might be the fact that industrial output in November had fallen 2.1 per cent from the same month a year ago, while the cumulative growth for the first eight months of the year was also negative at 0.2 per cent.

Fund managers have been worried that the US Federal Reserve’s decision last week to cut the bond purchase programme by another $10 billion would tighten capital inflows into India.

The major losers in the Sensex were Hindalco (5.48 per cent), Tata Motors (3.79 per cent), Tata Steel (3.58 per cent), Bajaj Auto (3.52 per cent), Bhel (3.10 per cent) and Bharti Airtel (2.92 per cent).