The eventful week started off on a high note but failed to sustain as global cues disrupted sentiment. Key indices ended lower on a weekly basis for the third time in the last five weeks
The 30-share BSE Sensex shed 0.6 percent in the week to close at 25,320 levels, while the 50-unit Nifty was down 0.5 percent at 7,567 levels. Investors continued to book profits in broader markets after making most of the recent bull-run which saw stocks from the space outperform the benchmark indices. Both BSE small-cap and mid-cap indices were down 1.1-1.2 per cent, in the week.
RBI’s credit policy sprung no surprises but the central bank’s outlook was distinctly hawkish.
Market remained volatile during the week, tracking weakness in rupee and escalating geopolitical risks. Russia-Ukraine tensions dominated the earlier part of the week while Friday saw US’ announcement of limited intervention in Iraq to check the advance of Islamic fundamentalists in the region.
Friday’s losses sparked off by a global sell-off in equities largely dragged the overall market performance this week.
US President Barack Obama on Friday authorised ‘limited’ airstrikes against militant outfit -Islamic State of Iraq and Syria (ISIS), in Iraq, to halt the latter’s bid to capture Erbil-the capital of Kurdistan region in Iraq, said reports.
The week started off on a positive note, with feeble anticipation of a potential surprise by Raghuram Rajan in the RBI’s bi-monthly monetary policy review. Although there was a near unanimous consensus on the Dalal street, that key rates will remain unchanged.
Tuesday's RBI credit policy was a non-event as key rates were left unchanged. The guidance given by the central banker was hawkish. He warned that inflation risks persist despite recent mellow in inflation figures, owing to a potential spike in food prices if monsoons disappoint.
CPI Inflation in June dropped to its 30-month levels and 400 bps down from its November 2013 high.
"The upside risks to the target of ensuring CPI inflation at or below 8 percent by January 2015 remain, although overall risks are more balanced than in June," said Rajan.
Rajan also said that RBI's goal was to bring consumer price-indexed inflation (CPI) down to 6 per cent by January 2014 and there was a need to look beyond the recent relief in inflation numbers. This prompted market men to give up any hopes of a rate cut in calendar year 2014.
However, the central bank slashed the statutory liquidity ratio (SLR) by 0.5 percent to unlock about Rs. 40,000 crore into the system. This failed to enthuse the market.
Brokerages and financial firms do not anticipate a rate cut till 2014-end. While HSBC upped the ante, saying they won’t rule out rate tightening ahead.
“We continue to expect the repo rate to be kept on hold through 2014 although a window of opportunity to cut may open around 4Q,” said ANZ Bank.
Market Internals
Among top Nifty gainers this week, ONGC & Wipro, Tech Mah, JSPL, ACC, Infosys, M&M surged between 2.5 percent-5 percent higher.
M&M reported a 4.3 percent growth in first quarter (April-June) profit at Rs 896.4 crore compared to Rs 859.8 crore in same quarter last year driven by operational performance.
Nearly all sectoral indices ended the week in red, barring IT & consumer durables. BSE Consumer Durables was up 3.1 percent; from the space Marico posted its first quarter earnings results. It beat street expectations both on bottomline and topline fronts but disappointed with its operational performance during April-June quarter. Consolidated net profit rose 17.5 percent year-on-year to Rs 185.3 crore driven by a healthy topline growth. Adjusted for the Kaya business which was demerged in October 2013, the growth in net profit was 19.4 percent.
CNX IT index was up 1.7 percent owing to a weakness in rupee against the dollar this week, in-line with global US dollar strength and weakness in emerging market stocks. The rupee posted its biggest single day fall (against the dollar) in six and a half months to 61.78 per dollar mark on Wednesday, on back of outflows from local equity and debt markets. Dollar demand from importers was also to be blamed, said experts.
From the pack, Infosys stock surged over 4 percent this week and fared among top Nifty performers. It hogged the limelight in the week after three of its retail investors and former top level executives, in a letter to the management, asked the firm to buy back stock worth Rs 11,200 cr, saying it will help check the "asymmetry of information" between management and investors.
Among the three former executives who shot off a letter to the Infy's board -TV Mohandas Pai, V Balakrishnan had served as chief fianancial officers (CFOs) while DN Prahlad as senior Vice President. The trio, according to reports, said that there is a need to announce a large and consistent buyback at the stock's 52-week high of Rs 3850-a-share, to show confidence in the management and the business model.
However, company sources told CNBC-TV 18 that they were "astonished" since ex-employees in question who demand a buyback now were themselves against the move when they were CFOs. They added that the company is at an inflection point and it is not the time to take rash decisions, and the new leadership be given the time to chart out its strategic course.
Cognizant lowered its revenue growth expectations for the full year to 14per cent from 16.5per cent. This sparked off concerns about the sector in general which witnessed a mixed quarter on the earnings front.
Bank Nifty and CNX PSU Bank indices slipped 2.4 percent, PNB, BoB, ICICI Bank Down, HDFC Bk, Axis Bank and SBI emerged on the losing front from the Nifty index.
Public lender State Bank of India (SBI) surprised street with the first quarter (April-June) net profit rising 3.3 percent year-on-year to Rs 3,349 crore on higher net interest income though it was impacted by higher provisions, tax cost and lower other income. Net profit in the year-ago period was Rs 3,241.08 crore. The growth in profitability was for the first time in last six quarters.
Among important earning results this week, Hero MotoCorp Ltd posted a net profit of Rs. 5627.60 mn for the quarter ended June 30, 2014 as compared to Rs. 5485.80 mn for the quarter ended June 30, 2013. The stock was down 1per cent at Rs2584. UBS, in a report, has maintained its ‘sell’ rating on the stock with a target price of Rs 2400. “Limited scope for margin improvement cost pressures to rise due to new facilities, higher R&D spends, start up investments in export markets. Honda expected to gain incremental market share in Motorcycles,” it said.
Expert Take
Market participants welcomed the recent correction, which they said loomed in the backdrop of rich valuations. They advised to make use if this as a buy on dips opportunity.
Dipen Sheth, HDFC Securties speaking to CNBC-TV18, said that he continues to be bullish on market. He said, deep cut in large cap stocks will offer meaningful opportunities.
He likes the financial space, especially SBI; among private sector banks, he is bullish on Axis Bank and ICICI Bank. Hero Motocorp and Maruti are his favourites from the auto space. He believes TCS will continue to grow current levels.
The recent correction notwithstanding, analysts remain bullish on markets. Too many headwinds — Russia, Gaza, Iraq, Rangarajan --- responsible for this correction, says Dilip Bhat of Prabhudas Lilladher of a market that fell a good 300 plus points on Friday. "We may see some more correction, but I will reiterate this is a buyer's market," he said. Next 15 days equity market may remain in corrective phase, but will like to add Divi's lab, L&T, Reliance , Lupin and L&T in his portfolio for the long term. "I will look at buying L&T at every correction."
Siddharth Bhamre of Angel Broking does not believe one should short this market now. He says the shorting quantum even in the bank Nifty will not see a breakdown. We are not at all bearish on this market, he says
Among other important developments during the week, the Cabinet has cleared a proposal to allow 100 per cent foreign direct investment (FDI) in Indian Railways.
The 30-share BSE Sensex shed 0.6 percent in the week to close at 25,320 levels, while the 50-unit Nifty was down 0.5 percent at 7,567 levels. Investors continued to book profits in broader markets after making most of the recent bull-run which saw stocks from the space outperform the benchmark indices. Both BSE small-cap and mid-cap indices were down 1.1-1.2 per cent, in the week.
RBI’s credit policy sprung no surprises but the central bank’s outlook was distinctly hawkish.
Market remained volatile during the week, tracking weakness in rupee and escalating geopolitical risks. Russia-Ukraine tensions dominated the earlier part of the week while Friday saw US’ announcement of limited intervention in Iraq to check the advance of Islamic fundamentalists in the region.
Friday’s losses sparked off by a global sell-off in equities largely dragged the overall market performance this week.
US President Barack Obama on Friday authorised ‘limited’ airstrikes against militant outfit -Islamic State of Iraq and Syria (ISIS), in Iraq, to halt the latter’s bid to capture Erbil-the capital of Kurdistan region in Iraq, said reports.
The week started off on a positive note, with feeble anticipation of a potential surprise by Raghuram Rajan in the RBI’s bi-monthly monetary policy review. Although there was a near unanimous consensus on the Dalal street, that key rates will remain unchanged.
Tuesday's RBI credit policy was a non-event as key rates were left unchanged. The guidance given by the central banker was hawkish. He warned that inflation risks persist despite recent mellow in inflation figures, owing to a potential spike in food prices if monsoons disappoint.
CPI Inflation in June dropped to its 30-month levels and 400 bps down from its November 2013 high.
"The upside risks to the target of ensuring CPI inflation at or below 8 percent by January 2015 remain, although overall risks are more balanced than in June," said Rajan.
Rajan also said that RBI's goal was to bring consumer price-indexed inflation (CPI) down to 6 per cent by January 2014 and there was a need to look beyond the recent relief in inflation numbers. This prompted market men to give up any hopes of a rate cut in calendar year 2014.
However, the central bank slashed the statutory liquidity ratio (SLR) by 0.5 percent to unlock about Rs. 40,000 crore into the system. This failed to enthuse the market.
Brokerages and financial firms do not anticipate a rate cut till 2014-end. While HSBC upped the ante, saying they won’t rule out rate tightening ahead.
“We continue to expect the repo rate to be kept on hold through 2014 although a window of opportunity to cut may open around 4Q,” said ANZ Bank.
Market Internals
Among top Nifty gainers this week, ONGC & Wipro, Tech Mah, JSPL, ACC, Infosys, M&M surged between 2.5 percent-5 percent higher.
M&M reported a 4.3 percent growth in first quarter (April-June) profit at Rs 896.4 crore compared to Rs 859.8 crore in same quarter last year driven by operational performance.
Nearly all sectoral indices ended the week in red, barring IT & consumer durables. BSE Consumer Durables was up 3.1 percent; from the space Marico posted its first quarter earnings results. It beat street expectations both on bottomline and topline fronts but disappointed with its operational performance during April-June quarter. Consolidated net profit rose 17.5 percent year-on-year to Rs 185.3 crore driven by a healthy topline growth. Adjusted for the Kaya business which was demerged in October 2013, the growth in net profit was 19.4 percent.
CNX IT index was up 1.7 percent owing to a weakness in rupee against the dollar this week, in-line with global US dollar strength and weakness in emerging market stocks. The rupee posted its biggest single day fall (against the dollar) in six and a half months to 61.78 per dollar mark on Wednesday, on back of outflows from local equity and debt markets. Dollar demand from importers was also to be blamed, said experts.
From the pack, Infosys stock surged over 4 percent this week and fared among top Nifty performers. It hogged the limelight in the week after three of its retail investors and former top level executives, in a letter to the management, asked the firm to buy back stock worth Rs 11,200 cr, saying it will help check the "asymmetry of information" between management and investors.
Among the three former executives who shot off a letter to the Infy's board -TV Mohandas Pai, V Balakrishnan had served as chief fianancial officers (CFOs) while DN Prahlad as senior Vice President. The trio, according to reports, said that there is a need to announce a large and consistent buyback at the stock's 52-week high of Rs 3850-a-share, to show confidence in the management and the business model.
However, company sources told CNBC-TV 18 that they were "astonished" since ex-employees in question who demand a buyback now were themselves against the move when they were CFOs. They added that the company is at an inflection point and it is not the time to take rash decisions, and the new leadership be given the time to chart out its strategic course.
Cognizant lowered its revenue growth expectations for the full year to 14per cent from 16.5per cent. This sparked off concerns about the sector in general which witnessed a mixed quarter on the earnings front.
Bank Nifty and CNX PSU Bank indices slipped 2.4 percent, PNB, BoB, ICICI Bank Down, HDFC Bk, Axis Bank and SBI emerged on the losing front from the Nifty index.
Public lender State Bank of India (SBI) surprised street with the first quarter (April-June) net profit rising 3.3 percent year-on-year to Rs 3,349 crore on higher net interest income though it was impacted by higher provisions, tax cost and lower other income. Net profit in the year-ago period was Rs 3,241.08 crore. The growth in profitability was for the first time in last six quarters.
Among important earning results this week, Hero MotoCorp Ltd posted a net profit of Rs. 5627.60 mn for the quarter ended June 30, 2014 as compared to Rs. 5485.80 mn for the quarter ended June 30, 2013. The stock was down 1per cent at Rs2584. UBS, in a report, has maintained its ‘sell’ rating on the stock with a target price of Rs 2400. “Limited scope for margin improvement cost pressures to rise due to new facilities, higher R&D spends, start up investments in export markets. Honda expected to gain incremental market share in Motorcycles,” it said.
Expert Take
Market participants welcomed the recent correction, which they said loomed in the backdrop of rich valuations. They advised to make use if this as a buy on dips opportunity.
Dipen Sheth, HDFC Securties speaking to CNBC-TV18, said that he continues to be bullish on market. He said, deep cut in large cap stocks will offer meaningful opportunities.
He likes the financial space, especially SBI; among private sector banks, he is bullish on Axis Bank and ICICI Bank. Hero Motocorp and Maruti are his favourites from the auto space. He believes TCS will continue to grow current levels.
The recent correction notwithstanding, analysts remain bullish on markets. Too many headwinds — Russia, Gaza, Iraq, Rangarajan --- responsible for this correction, says Dilip Bhat of Prabhudas Lilladher of a market that fell a good 300 plus points on Friday. "We may see some more correction, but I will reiterate this is a buyer's market," he said. Next 15 days equity market may remain in corrective phase, but will like to add Divi's lab, L&T, Reliance , Lupin and L&T in his portfolio for the long term. "I will look at buying L&T at every correction."
Siddharth Bhamre of Angel Broking does not believe one should short this market now. He says the shorting quantum even in the bank Nifty will not see a breakdown. We are not at all bearish on this market, he says
Among other important developments during the week, the Cabinet has cleared a proposal to allow 100 per cent foreign direct investment (FDI) in Indian Railways.
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