Investors are also wary of reforms facing hurdles.
R. Chandrasekaran
CHENNAI: The Indian stock market continued to witness downtrend in the week ended March 22 as the combination of various unfavorable events hurt market sentiments. As a result, the major indices reached a fresh low in 2013 and hit a four month low. The coming week will see more volatile trading as the holidays will shorten it to a three-day week.
While the Reserve Bank of India has cut the interest rates by 25 basis points as expected, the southern regional party DMK pulling out of the United Progressive Alliance on the same day thereby made it a non-event. The pull out also made investors jittery, as investors are concerned over passing of various reforms, which is likely to see roadblocks. The derivatives contract expires next Thursday and there could be only two days of trading before that. This has also hurt the investors’ sentiments and prevented from taking any fresh positions.
The government is planning major bills to get them passed during the parliamentary budget session. This includes, the Pension Fund Regulator and Development Authority, the Forwards Contracts (Regulation) Amendment, the National Food Security, land acquisition, rehabilitation and resettlement and the insurance laws (amendment). Investors’ are obviously worried about the safe passage of these and other bills in the aftermath of the DMK pull out.
However, the markets could breathe for one factor, i.e. there is little possibility of fresh elections to the Parliament immediately as none of the parties want to force the government for such an event. All the major parties are waiting for the government to commit more mistakes before being pushed to the corner.
If the Bombay Stock Exchange’s 30-share barometer plunged 691.11 points or 3.56 percent in 2013, the benchmark index suffered a loss of 125.94 points or 0.67 percent in March alone. The last time BSE’s Sensex hit below 18,850 level was on November 27 when the index closed at 18,842.08 points.
The major news to hit the Indian stock markets during the week was, finance minister asks banks to get dues back from promoters; Moody’s says higher food inflation credit is negative for India; Mahindra & Mahindra prices its electric car; RBI and Insurance Regulatory and Development Authority (IRDA) probe sting operations findings; DMK withdraws support to UPA government putting the Congress under the mercy of Mulayam Singh Yadav’s Samajwadi Party and Bahujan Samaj Party of Mayawati; Infosys CEO Shibulal sees distinct improvement in customer mood in the U.S. and the U.K.; RBI cuts interest rates by 25 basis points; HDFC chairman Deepak Parekh sees downward trend in interest rates; National Association of Software Service Companies launches 10K startups program; marginal impact on lending rates despite monetary easing; tractor industry is witnessing a demand de-growth both domestically and globally; mining industry seeks export duty rollbacks; banks prefer customers to settle dues through a compromise rather than recovery; purchase of aircraft freed from red tapes; and government approves 12 foreign direct investment proposals.
For the week ended March 22, the BSE’s Sensex plunged 691.96 points or 3.56 percent to close the week at 18,735.6 points from 19,426.71 points, while the National Stock Exchange’s Nifty plummeted 221.25 points or 3.77 percent to end the week at 5,651.35.
Among the BSE sectoral indices, realty is the worst hit losing 13 percent, while PSU, power and metals followed it with a loss of 7.6 percent, 7.3 percent, and 6.9 percent, respectively. However, FMCG bucked the trend with a marginal gain of 0.10 percent led by ITC and Hindustan Unilver by 1.03 percent and 0.25 percent, respectively.
IT stocks were also not spared with TCS, Wipro and Infosys losing 1.91 percent, 1.15 percent, and 0.8 percent, respectively. Similarly, banking stocks such as SBI, ICICI Bank, and HDFC Bank suffered a loss of 7.86 percent 3.64 percent, and 5.22 percent, respectively. Axis Bank, which was charged of money laundering by cobrapost.com through a sting operation, also slipped 3.15 percent.
Maruti Suzuki led the auto stocks fall with a 7.3 percent drop followed by Tata Moors by 7.11 percent, and Mahindra & Mahindra by 5.81 percent. The two-wheelers were also affected with Hero MotoCorp and Bajaj Auto shedding 2.09 percent and 1.6 percent, respectively.
Metal melt down was led by Tata Steel by 9.1 percent, whereas Sterlite Industries and Hindalco Industries edged lower by 6.61 percent and 6.37 percent, respectively. Telecom company, Bharti Airtel dropped 5.42 percent, while ONGC and Reliance Industries shed 7.34 percent and 3.91 percent, respectively in the oil space.
Foreign institutional investors or FIIs continue to remain net buyers with a buying support of $388.51 million in the week ended March 22, while domestic funds continue to be net sellers of Rs.15.82 billion until Mach 21.
For the upcoming week, the stock markets will witness volatile trading, as the trading session will be limited to only three in view of Holi and Good Friday holidays. Also, the derivatives contract expiry on Thursday will continue to weigh on the sentiments of investors.