Investors edgy ahead of the Union budget.
R. Chandrasekaran
CHENNAI: The Indian stock market is struggling for a direction ahead of the Union budget scheduled to be presented in Parliament next Thursday. The bears seemed to have been waiting in the wings to take advantage of any negative sentiment to drag down the major indices. This could be seen from the way the stock markets reacted to the U.S. Federal Reserve’s minutes released on Wednesday. This has resulted in the indices reaching a two-month low.
The U.S. central bank was concerned over the policy makers’ likely pull back of their quantitative easing program. The Fed too indicated that it will take a fresh view of the quantitative easing program in March. This triggered a global sell out on Thursday’s trading and Indian stock market was no exception to this.
Aside from this, the Indian markets were moving in sideways in the absence of any clear cut indications of the likelihood of a market favorable budget. The derivatives contract expiry next Thursday also limited any possibility of investors’ resorting to fresh buying. Traders are worried over the conflicting reports. While reports indicated that the government is planning to reduce its spending by close to 10 percent in an effort to cut down the fiscal deficit, the Reserve Bank of India fears that slashing of capital spending will hurt growth prospects and that populist scheme at the cost of capital expenditure could only lift inflation. The higher inflation will not allow the central bank of any chance to cut interest rates to stimulate growth. This is clearly weighing on the investors’ sentiments.
The major news to hit the Indian stock market during the week included Tata’s decision to enter airline sector with a stake in an Air Asia promoted company, which is first aviation foreign direct investment following the government’s relaxation; Daimler India Commercial Vehicles CEO Marc Listosella called for implementations and not more policies from the government; Wipro Infotech is likely to lay off jobs to avoid overlap; Reliance Industries and British Petroleum to invest $5 billion jointly in Krishna Godavari basin to raise output; Used cars sales accelerate even as the new car sales get stuck; December quarter earnings growth disappoints with Nifty companies growth slowing to 10 percent and operating profit sliding to 5 percent; King Fisher Airlines staff gets a month’s salary; UB Group gives its nod to more than double its loan exposure to King Fisher Airlines as the banks are focusing dues recovery; Chennai, Bangalore stock exchanges to merge; Telecom panel allows Broadband players to provide voice services that is likely to benefit Reliance Industries; government plans bailout package for highway companies as some of the companies walked out of projects; National Highways Authority of India may pay private developers for any delay in getting project clearance; Government cancels Rs.120 billion borrowing from the market, visiting British prime minister David Cameron wants U.K. to be a partner of choice for India; leading home lender HDFC’s vice chairman and CEO Keki Mistry called for raising of exemption cap on home loans; government denies any plans to curb onion exports, RBI says entities with sound credentials can set up banks; and the government is looking to maximize excise duty collections.
Of the five trading sessions, the market ended up on positive territory on three days and closed in the negative trajectory after the U.S. Fed’s minutes report. On Monday, the Bombay Stock Exchange’s 30-share barometer ended with a 32.93 points or 0.17 percent gain and it was further consolidated by another 134.64 points or 0.69 percent on Tuesday. The BSE’s benchmark index edged up modestly by 7.03 points or 0.04 percent on Wednesday. However, on Thursday, following the overnight report of the U.S. central bank’s concern on growth prospects, the BSE’s Sensex tanked 317.39 points or 1.62 percent and the losses were widened modestly on Friday by 8.35 points or 0.04 percent to finish the week on a subdued note.
As a result the mixed trading during the week, the BSE’s benchmark index lost 151.14 points or 0.78 percent to finish the week ended February 22 at 19,317.01 points, while the National Stock Exchange’s Nifty shed 37.1 points or 0.63 percent to close the week.
Among the BSE’s sectoral indices, realty, IT, healthcare and Oil & Gas sectors advanced 3.8 percent, 2 percent, 1.5 percent and 1.5 percent, respectively. The biggest loser was metals index shedding 3.5 percent followed by Bankex, FMCG and Consumer Durables by 2.3 percent, 2.1 percent and 1.5 percent, respectively.
Of the 30 Sensex stocks, eleven closed in the green leaving the other 19 stocks to finish the week in the red. Realty stock, DLF, which reached a 52-week high on Friday, ended the week with a 12.9 percent gain, while HDIL advanced 1.4 percent. However, Unitech lost 1.32 percent.
In the IT space, Infosys and TCS closed higher by 1.84 percent and 0.9 percent respectively. However, Wipro gained significantly by 4.19 percent. The index heavyweight Reliance Industries advanced 2.11 percent, whereas Oil and Natural Gas Commission edged up by 0.7 percent in the oil and gas sector. However, Indian Oil Corporation slipped 0.6 percent.
In the metal segment, Tatal Steel, Hindalco Industries and Sterlite Industries lost 3.06 percent, 2.32 percent and 1.91 percent, respectively. Similarly, in the Banking sector, SBI, ICICI Bank and HDFC Bank shed 1.65 percent, 2.83 percent and 2.24 percent, respectively.
Tata Motors, which gained 6.48 percent last week, reversed the trend this week to post a loss of 3.63 percent. Other stocks in the car or truck segment also fared badly with Mahindra & Mahindra and Maruti shedding 0.48 percent and 2.24 percent respectively. However, two-wheeler makers Hero MotoCorp and Bajaj Auto edged up by 0.22 percent and 0.95 percent, respectively
For the week ended February 22, foreign institutional investors or FIIs have parked an additional $364.16 million in Indian equities. This takes FIIs inflow into Indian markets to $4.31 billion in February. On the other hand, domestic funds outflow increased to Rs.14.23 billion in February until 21. Though they were net buyers on Monday and Tuesday, they turned into a net seller on the subsequent two days.
For the upcoming week, the Indian stock markets are likely to move sideways with the futures and options contract expiring on Thursday and the budget. A clear-cut indication will likely to emerge after the budget announcement.