Weekly Wrap : Sensex loses over 2% on weak global cues, falling rupee

Last Updated: Sat, Jun 22, 2013 07:37 hrs

Heavy selling by foreign institutional investors almost right through the week (17 - 21 June, 2013) on the back of the U.S. Federal Reserve's statement that hinted at an end to monetary stimulus as early as by this year end, a rather weak reading of Chinese manufacturing activity and a weak rupee dragged down stocks and pushed the key indices Sensex and Nifty to lower levels for a third straight week.

The market posted gains on three of the five sessions, but losses recorded on the two sessions were so sharp that the BSE benchmark ended the week with a loss of around 404 points or 2.1% at 18,774. The National Stock Exchange's Nifty index closed at 5668, recording a loss of around 141 points or 2.4%. With scores of midcap and smallcap stocks too trending lower, the BSE Midcap and Smallcap indices lost 2.3% and 1%, respectively.

According to data available from the exchanges, FIIs are net sellers to the tune of over Rs 5000 crore this month (till 20 June).

It was a fairly strong start for the market last week with investors betting on hopes the U.S. Federal Reserve will continue its asset purchase program. Investors were a bit disappointed at the Reserve Bank of India keeping rates unchanged, but the market still displayed enough strength to romp home on a winning note that day. While the Sensex ended the day with a gain of 148 points, the Nifty ended nearly 42 points up on that session.

The Reserve Bank of India, unveiling its June mid quarter monetary policy review, left unchanged the repo rate and CRR at 7.25% and 4%, respectively, and said only durable receding of inflation will open up the space for monetary policy to continue to address risks to growth. A falling rupee too played a role in the apex bank's decision to hold rates.

The central bank's decision to keep rates unchanged did trigger a sell-off of sorts, particularly in banking, realty and infrastructure stocks, and pushed the key indices Sensex and Nifty down into the red in mid morning trade, but the market bounced back smartly and ended the session on a firm note, thanks largely to a positive trend in Asian and European markets and on encouraging news on the monsoon front.

Amid listless trades, stocks swung between gains and losses on Tuesday as a weakening rupee hurt sentiment and rendered the mood quite cautious. The Sensex ended lower by a little over 100 points.

On Wednesday, stocks ended mostly flat, despite some brisk buying in late afternoon trades. After opening lower on weak cues from Asian bourses, the market struggled to edge higher till around mid afternoon, with investors treading cautiously ahead of the outcome of the U.S. Federal Reserve meet. The Sensex and Nifty ended the session, gaining 22 points and 9 points, respectively.

It was a good session for shares of some non-banking finance companies, as investors indulged in some buying in that space in anticipation some NBFCs will be getting banking licenses. Mahindra and Mahindra Financial Services, Bajaj Finserv, Reliance Capial and L&T Finance Holdings all some hectic buying during the day. IDFC moved up after the company said its board has approved a resolution for making an application to the Reserve Bank of India for obtaining a banking license.

A sell-off in global markets after the U.S. Federal Reserve hinted at ending the stimulus program by mid-2014 and on a highly disappointing reading on Chinese manufacturing activity hurt sentiment and pushed down values on the Indian bourses on Thursday.

And things turned worse for stocks, as the Indian rupee plunged to a new all-time low of 59.93 against the greenback, extending its recent slide. The Sensex ended the session with a huge loss of 526 points or 2.7% and the Nifty closed 166 points or 2.9% down.

According to a preliminary survey, activity in China's vast manufacturing sector weakened further in June to a 9-month low as new orders faltered, reinforcing signs of tepid economic growth in the second quarter. The flash HSBC Purchasing Managers' Index fell to 48.3 in June from May's final reading of 49.2, drifting further away from the 50-point level demarcating expansion from contraction.

On Friday, the market ended with modest gains, with a firm trend on the European bourses and higher U.S. index futures aiding the surge.

Metal stocks saw some heavy selling last week, with weak economic data from China contributing to their decline. Jindal Steel & Power was the biggest loser in that space, as it went down by nearly 16%. Reports that the company's promoters have pledged their holdings with Credit Suisse and that the CBI has filed an FIR against the company's promoter triggered heavy selling at the counter.

Hindalco lost nearly 10%. Sterlite Industries, Tata Steel, SAIL and JSW Steel also lost significant ground.

Reliance Industries lost nearly 2.5% last week. GAIL India lost almost 3.5%. ITC ended lower by around 2.5%. Bank stocks, led by sector heavyweights State Bank of India, HDFC Bank, ICICI Bank and Axis Bank, ended sharply lower following the central bank leaving rates unchanged. Pharmaceuticals, FMCG and capital goods stocks were quite listless for a better part of the week.

Automobile stocks had a mixed outing last week. While Hero Motocorp and Bajaj Auto moved higher, Tata Motors, Maruti Suzuki and Mahindra & Mahindra saw some weak spells.

Information technology stocks attracted buyers thanks to a weakening rupee. While Infosys, Wipro, Tech Mahindra and Mahindra Satyam surged higher, Tata Consultancy Services declined and lost nearly 2%.

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