Decline to continue: Weekly Market Report

Moneylife Digital Team 01 September 2012

Higher high, higher low on the Nifty may change the trend

After closing in the positive for four weeks in a row, the Indian market closed lower on the continuing disruption of Parliament proceedings with the main opposition party, BJP, demanding nothing less than the resignation of the prime minister on the coal allotment issue. The political logjam has stalled the much-needed reforms process and has made investors restless.

The BSE Sensex ended the week at 17,430, a drop of 354 points (1.99%) and the NSE Nifty settled 128 points (2.38%) lower at 5,259. The market is likely to dip further. On Friday the Nifty made a lower high and a lower low and ended at the 50 day moving average. We may now see the index heading further down unless it manages to make a higher high and higher low.

The market closed lower on Monday on the political impasse in Delhi and selling in banking, capital goods and technology sectors. Continuing disruption in Parliament, which made investors nervous, was the cause of the market settling in the red on Tuesday. The benchmarks settled in the negative on Wednesday on extensive selling in blue chips and cautiousness ahead of the release of India’s first quarter GDP data.

The market closed in the positive on Thursday on buying in realty, healthcare and technology stocks in the last hour of trade. The market closed in the red on the last trading day of the week on the back of a slowdown in the country’s first quarter economic growth and continuing paralysis of the Parliament.

In the sectoral space, the BSE Fast Moving Consumer Goods and BSE Healthcare both closed up 1% while BSE Metal (down 7%) and BSE Realty (down 5%) were the top losers.

Among Sensex stocks, Cipla (up 5%), TCS (up 2%), HDFC, Tata Power and ITC (up 1% each) were the top gainers. The losers were led by Sterlite Industries (down 14%), Jindal Steel & Power (down 11%), Hero MotoCorp (down 8%), BHEL (down 7%) and Tata Steel (down 6%).

The top Nifty gainers were Cipla (up 3%), Power Grid Corporation, HDFC, TCS (up 2% each) and Siemens (up 1%). The key losers were Sterlite Ind, Jaiprakash Associates (down 14% each), Jindal Steel & Power, Sesa Goa (down 11% each) and Hero MotoCorp (down 9% each).

Poor showing by the manufacturing sector pulled down the GDP growth to 5.5% in the first quarter, the decade’s worst Q1 performance, prompting the government to press for quick decisions to boost investments. The growth rate on the sequential basis, however, was marginally better than 5.3% registered in the fourth quarter (January-March) of the last financial year.

In a major setback to the Sahara Group, the Supreme Court on Friday directed two of its companies to refund around Rs17,400 crore to their investors within three months with 15% interest. The two-judge bench directed the Securities and Exchange Board of India (SEBI) to take action against the companies, Sahara India Real Estate Corporation and Sahara Housing Investment Corporation, if they fail to refund the money.

The bench further directed SEBI to conduct investigation against the companies to find out their actual subscriber base besides getting other relevant information.

On the international front, US Federal Reserve chairman Ben Bernanke on Friday said that the low rate policy will have to continue for some more time on the back of the slowdown in the economy. He added, “...the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labour market conditions in a context of price stability.”

Meanwhile, China's official factory purchasing managers’ index fell to 49.2 in August from 50.1 in July, marking the lowest reading since November 2011.

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