Market Moving southward

The country's main stock index opened 0.3 per cent down Tuesday, with ICICI Bank and Infosys Technologies leading the losses.At 9:57 a.m., the 30-share BSE index was down 0.44 per cent, or 83.14 points, at 18,654.13, with 14 of the components falling.The 50-issue NSE index was down 0.26 per cent at 5,602.50.(C) 2007 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters Sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.Indian industrial output expanded at its slowest in nearly a year in September as higher interest rates and a stronger rupee bit, and the pace fuelled expectations that official rates have peaked. Industrial production in September rose 6.4 percent from a year earlier, data showed on Monday, sharply lower than annual growth of 10.7 percent in August and missing market forecasts of 9.9 percent growth.
September's growth is the lowest since October last year when output expanded an annual 4.5 percent."Monetary policy tightening has had an impact on interest rate sensitive consumer goods but capital goods output remains buoyant," said Sonal Varma, economist at Lehman Brothers.Indian markets showed little reaction to the data.The yield on the 10-year federal bond held at 7.94 percent, unchanged from before the numbers, and the partially convertible rupee nudged a shade up to 39.3050/3175 per dollar in late trade.
The central bank raised interest rates five times between mid-2006 and March this year but left them steady at its last review in October.It has also increased banks' reserve requirements by 250 basis points since December to check credit growth and cool inflationary pressures.
Manufacturing output rose 6.6 percent in September from a year earlier, compared with revised annual growth of 10.5 percent in August.
DEMAND HIT
Output grew an annual 9.2 percent in the first six months of the 2007/08 fiscal year that began in April.Higher interest rates have hurt domestic demand and exporters have also been hit by a 12.5 percent rise in the rupee this year. The rupee reached its strongest level in nearly 10 years last week at 39.16 per dollar .A government report released later on Monday said the capital goods sector was likely to maintain its current high growth rate but there was a need to revive consumption of consumer durables to restore industrial output growth to double digits.
Policymakers hope festivities in the latter part of the year will help consumer demand rebound. Some banks have cut rates for consumer loans to push demand for homes, cars and televisions.
While consumer goods output fell 0.6 percent from a year earlier, capital goods grew an annual 18.6 percent in September and mining rose 6.0 percent. "Consumer goods and durables output have fallen. This is clearly an impact of interest rates," said Dharma Kriti Joshi, principal economist with ratings agency Crisil. But Joshi said September's weak expansion was probably an aberration. "The September number probably exaggerates the extent of slowdown and we expect full-year industrial growth at 9.2 percent, compared with 11 percent last year," he said.
Analysts on average see the trillion-dollar economy slowing to 8.5 percent expansion this financial year ending March 2008 from 9.4 percent in 2006/07. India, now the world's fastest-growing major economy after China, has averaged 8.6 percent in the past four years thanks to strong consumer and investment demand and the central bank projects a growth rate of 8.5 percent in 2007/08.
Industrial production accounts for about a fifth of GDP.