RBI’s policy holds key for upcoming week.
R. Chandrasekaran
CHENNAI: Indian stocks failed to hold on to the gains recorded in the previous week. The stocks lost in four sessions out of the five sessions indicating the sentiments towards profit booking. Predictably, investors took advantage of the higher levels reached in the previous week after one month of battering in February to lock profits.
The weakness in the global markets too added to the depressed sentiments prevailed during the week ended March 15. Though there were some positive or favorable news for the market to react positively, the fear of the Reserve Bank of India leaving the key rates unchanged or leaving no room for a cut in interest rates has clearly overshadowed them. For instance, India’s industrial production rose 2.4 percent in January, which was more than the market predicted. Similarly, wholesale price inflation rose 6.54 percent, which was slower than 6.62 percent at an annual rate in January.
Meanwhile, the RBI is meeting on March 19 to review mid-quarter Monetary Policy. While the government wants RBI to cut interest rates to stimulate growth, the central bank is concerned over the inflation and the fiscal deficit as the current year’s fiscal target is being achieved through cut in spending. The market believes that the RBI is not likely to cut interest rates given the RBI Governor’s stand on growth as well as current account deficit.
Among the news to hit the Indian stock markets during the week included, global funds and equity investors are making a beeline to invests in Indian road sector to help developers free up their capital; Government contracts help Hewlett Packard retains leadership position in India in PC shipment; car sales see steepest monthly drop in February in 12 years; World Bank sees India to grow 6 percent next year; Wal-Mart lobbying probe report expected in April; exports grow at 4.2 percent in February making it the fastest pace in 12 months; Government gets only Rs.36 billion from CDMA spectrum auction sale; nine companies planning to raise Rs.263 billion through tax-free bonds; industrial production rose 2.4 percent in January; Jet Airways promoter Naresh Goyal to divest 11 percent to meet SEBI’s 75 percent holding cap for promoters ahead of Etihad deal; food pushes retail inflation in February; Government to introduce plastic Rs.10 notes, Reliance power commissions 600 MW Sasan power project; Mahindra & Mahindra recalls 25K XUV500S; Government to sell up to 10 percent in National Aluminum Co. or NALCO; Mahindra Systech in advanced talks with European auto components maker CIE for an alliance; banks to probe sting’s revelations; RBI is unlikely to cut interest rates; Cognizant pays out lower bonuses; income tax notices sent to 35K defaulters; and HPCL to lead in promoting $7 billion refinery in Rajasthan.
The markets started off on a subdued note on Monday losing 0.19 percent. The losses only extended on Tuesday and Wednesday by 0.41 percent and 1.03 percent, respectively. The markets rebounded on Thursday to gain 1.07 percent as the core inflation eased to a low of 3.8 percent in February on top of a 4.1 percent in January. However, global weakness hurt the sentiments on Friday resulting in the Bombay Stock Exchange’s 30-share barometer shedding 0.73 percent.
For the week ended March 15, the BSE’s Sensex lost 255.67 points or 1.30 percent to 19,427.56 points from 19,683.23 points, while the National Stock Exchange’s Nifty dropped 73.1 points or 1.23 percent to 5,872.6 points from 5,945.7 points. While nine stocks advanced, 21 shares slipped during the week.
Most of the sectoral indices closed the week in the red only. However, BSE’s FMCG index bucked the trend to post a gain of 1.5 percent. Consumer durables index is the worst sufferer losing 3.8 percent followed by Bankex, Auto and Metals by 2.9 percent, 2.2 percent and 2 percent, respectively.
Banking stocks, especially the three private sector banks, ICICI Bank, HDFC Bank, and Axis Bank shed 6.28 percent, 2.78 percent, and 4.64 percent, respectively. Though these banks shares slipped for a while after a sting operations report charged these banks of indulging in money laundering on Thursday, shares of these banks bounced back on the same day. However, SBI climbed 2.61 percent, whereas home lender HDFC edged up by 0.46 percent.
In the IT space, Infosys, TCS, and Wipro shed 2.91 percent, 0.84 percent, and 0.92 percent, respectively. Reliance Industries, an index heavyweight, also slipped 0.85 percent, while another index performer ITC advanced 1.44 percent. Similarly, Tata Power, Hindustan Unilver, and L&T advanced 3.14 percent, 4.52 percent, and 0.70 percent respectively among the few Sensex pack.
The auto segment saw Bajaj Auto as the top loser shedding 7.95 percent, while Hero MotoCorp slipped 3.55 percent. In the four-wheeler segment, Tata Motors and Maruti lost 4.16 percent and 1.24 percent respectively, while Mahindra & Mahindra edged up by 2.80 percent.
The foreign institutional investors or FIIs remained net buyers during the week with a net inflow of $741.55 million. But the domestic mutual funds turned a net seller not only during the week but also in March. The Indian mutual funds’ net outflow in March is Rs.12.49 billion.
For the next week, the markets will be expecting RBI’s monetary policy to guide the directions. If the central bank reduces interest rates, the market is likely to come back to winning streaks.