Weekly Wrap:Sensex loses over 3% on weak global cues, economic worries

Last Updated: Sat, May 12, 2012 07:12 hrs
BSE Sensex rises in choppy trade

Losing ground on four of the five sessions, amid growing concerns about the financial situation in the eurozone and on worries about the domestic economy, the Indian stock market drifted down sharply last week (May 7-11, 2012).

While the BSE benchmark Sensex ended the week with a loss of around 538 points or 3.2% at 16,293, the National Stock Exchange's barometer Nifty closed lower by 158 points or 3.1% at 4,929. Mirroring the sell-off at side counters, the Midcap and Smallcap indices drifted down by nearly 2.5% and 3%, respectively.

The market started the week on a fairly bright note, due largely to a statement from the finance minister Pranab Mukherjee about the government's decision to defer the application of General Anti-Avoidance Rules (GARR) by one year until 1 April 2013. Some bargain hunting after the previous week's losses too helped the cause of a few front line stocks that day. While the Sensex surged 82 points in that session, the Nifty moved up by about 27 points.

Stock prices plunged sharply on Tuesday with investors indulging in heavy selling following a weak lead from European markets. Remarks by the deputy governor of the Reserve Bank of India that there may not be a rate cut in the near future too hurt sentiment to a significant extent. The Sensex ended the day weaker by as much as 367 points or 2.2%, while the Nifty lost 114 points or 2.2%.

The market declined again on Wednesday, although losses were less pronounced thanks to support at lower levels. Data showing heavy selling by FIIs in recent sessions spooked the market. The Sensex and Nifty ended the day, losing around 67 points and 25 points, respectively.

And then, after suffering another moderate setback in the next session, with the Sensex and Nifty going down by 60 points and 9 points, respectively, the market extended its losses to a fourth straight session on Friday following a highly disappointing industrial production report for March 2012. The Sensex lost around 127 points in the final session, while the Nifty lost 37 points.

According to the data released by the government on Friday, industrial production declined by 3.5% in March mainly on account of contraction in manufacturing and mining output. Growth in the factory output, as measured by the Index of Industrial Production, was higher at 9.4% in March last year.

The industrial production was dismal at 2.8% in 2011-12 as compared to 8.2% in the previous financial year, due degrowth in mining at 2% and a rather modest 2.9% growth in manufacturing, the government data showed.

Expressing disappointment over the industrial prduction data, C Rangarajan, Chairman of PMEAC, said that the capital goods sector has shown huge volatility. He also emphasized the immediate need to address the calculation of the IIP data.

Tata Power (down 7.7%) and Coal India (down 4.5%) declined sharply. NTPC lost over 4% on disappointing results.

Reliance Industries lost around 4%, due largely to the company cutting its estimate of its total proven gas reserves by over 6.5% due to lower than expected output from its east coast gas field. The stock did find some support midway through the week after the company said it has signed a $2 billion equivalent loan with nine banks covered by Euler Hermes Deutschland on Monday and that it will use the funds to finance goods and services procured from German suppliers.

Shares of interest rate sensitive banking, automobile and realty sectors saw some spirited buying in late afternoon trade on Friday amid expectations of some monetary easing by the central bank following a rather disappointing factory output report. However, due to sharp losses posted earlier in the week, several bank stocks, including heavyweights State Bank of India, HDFC Bank, ICICI Bank, Axis Bank, Kotak Bank and Punjab National Bank, ended the week notably lower.

Similarly, automobile stocks too posted weekly losses, due to muted sales data for April. Tata Motors, Maruti Suzuki, Mahindra & Mahindra and Hero Motocorp lost 1.5% - 7%, even as Bajaj Auto bucked the trend and ended stronger by over 3.5%.

Healthcare stocks drifted lower following the government ordering a probe into alleged irregularities indulged in by the drug regulator in approving drugs. Despite some good results posted by key pharma players, the sector suffered notable losses last week.

Metal stocks Tata Steel, Sterlite Industries, Jindal Power and Hindalco lost significant ground last week. Several other metal stocks, including SAIL and JSW Steel, also ended weak.

IT majors Infosys, Wipro, Tata Consultancy Services and HCL Technologies lost ground amid lingering concerns about the economic situation in Europe. Some weak data from the U.S., also hurt sentiment to an extent. The apex bank's intervention in the currency market to arrest the rupee's slide too contributed to some weakness in the IT space.

The central bank, to curb the decline of the Indian currency against the greenback, directed all foreign exchange earners to convert 50% of their total foregin exchange earnings kept in the banks into rupees within a fortnight.

Shares of realty major DLF and PSU power equipment maker BHEL bucked the trend and ended the week with gains of 3% and 3.3%, respectivley.

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