Investors take opportunity to book profits at higher levels.
R. Chandrasekaran
CHENNAI: Indian stocks failed to keep the week-over-week gain momentum recorded in the previous two weeks and slipped in the negative territory during the week ended February 1.
The futures and options contract expiry dragged down the sentiments of traders and investors. There was also not much from the domestic circuit to lift investors’ interests as the Reserve Bank of India’s cut in rate interest rates came in line with expectations. The stock markets lacked direction in a rollercoaster trading during the week that was haunted by derivatives contract expiry.
Though the RBI surprised investors with a 25 basis point reduction in cash reserve ratio on Tuesday resulting in Rs.180 billion release of funds to improve liquidity, the move failed to attract the expected investors’ attention.
While there was not much of negativism, investors took the opportunity to book profits at higher levels. This has effected in the pulling down the Bombay Stock Exchange’s 30 shares and National Stock Exchange’s 50 shares barometer indices to below the psychological level of 20,000 and 6,000 levels respectively.
Among the news to hit Indian stock markets during the week were the RBI Survey pointed out economic growth to slow to 5.5 percent this fiscal and recover gradually next year; the central bank also cautioned that the business sentiments remain weak;
RBI wants sustained fiscal consolidation for easing monetary policy; the central bank reduced interest rates and CRR by 0.25 percentage points; Government’s fiscal deficit reached 78.8 percent of the budget forecast during the period April to December; economic growth for fiscal year ended March 2012 revised down to 6.2 percent from 6.5 percent earlier; RBI indicates reduction in held-to-maturity ratio in April; factory orders growth for January slowed down; Standard & Poor’s indicated India’s risk of credit rating downgrade recedes somewhat; India’s foreign exchange reserves rose by $77.6 million to $295.74 billion during the week ended January 27; and Amway India to launch Rs.5 billion manufacturing unit in Tamil Nadu.
The week opened on a buoyant note and the BSE’s benchmark index reached 20,172.45 points on Monday; but it failed to hold on to the gains and ended on a flat note. Similarly, on Tuesday, the markets reacted favorably to the RBI’s decision on key rates to take Sensex to 20, 203.66 points, one of the highs in recent times, before closing with a loss. Though the market managed to close with a slender gain of 14.04 points on Wednesday, the Futures and Options contract expiry on Thursday dragged down the stocks by 110.02 points. Friday turned out to be a further weakening of sentiments following a private survey indication that manufacturing output recorded slowest pace in three months in January. Of the five trading sessions, three days belonged to the bears indicating weakness.
This has resulted in the BSE’s benchmark index closing below the psychological 20,000 level to 19,781.49 points, a drop of 322.04 points or 1.6 percent, while the NSE’s Nifty shed 75.75 points or 1.25 percent to 5,998.9 points in the week ended February 1.
The sectoral indices too performed poorly with the capital goods sector, Auto, Oil & Gas and Technology recording a fall of 2.9 percent, 1.7 percent and 1.6 percent, respectively. However, consumer durables, FMCG, realty and healthcare bucked the trend to post a gain of 2.2 percent, 1.7 percent, 1.3 percent, and 1.1 percent, respectively.
Of the 30 share from the Sensex pack, 23 companies’ shares recorded a fall and the rest managed to post a gain. Oil and gas companies Reliance Industries dropped 2.02 percent after the stock reached a 52-week high only in the previous week following its strong December quarterly earnings number. The government-controlled Oil and Natural Gas Commission or ONGC also skid 2.51 percent.
Auto stocks such as Mahindra and Mahindra and Tata Motors found not much takers as the stocks suffered a loss of 1.52 percent and 5.33 percent respectively, while two-wheeler manufacturers Hero MotoCorp gained 2.79 percent leaving Bajaj Auto to suffer a fall of 1.24 percent. However, Maruti Suzuki managed to post a gain of 0.53 percent.
Yet, the worst sufferer in the Sensex pack was telecom major, Bharti Airtel losing 8.09 percent after the company reported a 72 percent drop in net profit for the third quarter. The metal stocks also got melt down with Jindal Steel & Power dropped 3.98 percent following by Hindalco and Tata steel by 2.53 percent and 1.43 percent, respectively.
In the banking space too, profit taking were seen with SBI, ICICI Bank and HDFC Bank ending in the negative territory losing 4.11 percent, 0.15 percent, and 3.66 percent, respectively. Similar is the case with technology stocks as Infosys and Tata Consultancy Services shed 1.55 percent and 2.28 percent, respectively.
In the depressed market, Coal India advanced significantly by 4.26 percent thus earned the top performer tag during the week. Pharma stocks such as Cipla and Dr. Reddy’s Laboratories advanced 3.89 percent and 0.21 percent respectively, whereas Sun Pharmaceutical slipped 0.87 percent during the week.
The upcoming week will likely to see another volatile trading week. While some analysts’ expect bulls to come back to the markets, others believe that the markets could see further downside before an uptick.