Weekly Wrap : Sensex, Nifty post notable losses, as slowdown fears weigh

Last Updated: Sat, Oct 13, 2012 12:06 hrs

The market saw some weak spells during the week ended 12 October 2012, amid some weak forecasts for the country's economic growth.

The International Monetary Fund and the World Bank cut India's growth outlook, while rating agency Standard & Poor's warned of a likely downgrade of India's credit rating to junk status within the next 24 months.

Recording losses on three of the five sessions, the BSE benchmark Sensex ended the week with a loss of 263 points or 1.4% at 18,675. The Nifty index of the National Stock Exchange declined by around 71 points or 1.2% to 5676. Midcap and smallcap stocks were mostly subdued amid lackluster trades. The BSE Midcap and Smallcap indices ended little changed from previous week's closing levels.

Heavy buying by foreign institutional investors limited the market's downside to an extent.

On Monday, the market started off on a weak note, and, despite staging a smart recovery soon thereafter, faltered again and ended sharply lower, following the International Monetary Fund issuing a dim forecast for the Asian economy. Profit taking after the previous week's gains too contributed to the market's decline.

While the Sensex ended the day with a loss of around 230 points or 1.2%, the Nifty closed lower by 71 points or 1.2%.

Realty stocks, led by DLF, were among the most prominent losers that day. DLF ended lower by over 7% due to heavy selling in the stock following social activist Arvind Kejriwal accusing the company of favouring Robert Vadra, son-in-law of Congress chief and the UPA Chairperson Sonia Gandhi, with easy loans for some undue gains. In a clarification DLF, has rejected the allegations and said that it had given Rs 65 crore as business advances out of which Rs 15 crore was fully refunded and Rs 50 crore was used for purchase of land.

After a positive start and a subsequent fall from higher levels, the market recovered well to sign off on a firm note on Tuesday. Besides a firm trend in Asian markets, bargain hunting and data showing heavy buying by FIIs in recent sessions aided sentiment to a notable extent that day. The Sensex ended up by around 85 points and the Nifty notched up a gain of 29 points.

A rating downgrade warning by Standard & Poor's hurt sentiment and triggered some hectic buying at several counters on Wednesday, resulting in the Sensex and Nifty going down by 162 points and points, respectively.

Bargain hunting and a firm trend in European markets lifted stocks on Thursday. The government's decision to allow direct transfer of urea subsidy too aided sentiment to a significant extent. Investors were also betting on more reforms announcements from the government and a rate cut from the central bank later this month. The Sensex ended the day with a gain of 174 points, while the Nifty gained 56 points.

Fertilizer shares had a bright session following the Cabinet Committee on Economic Affairs approving the proposal to allow payment of fertilizer subsidy to companies based on the receipt of fertilizers and the acknowledgement of receipts of the same by retailers.

After a weak start following a weak earnings guidance from IT bellwether Infosys, and a subsequent rebound on the back of a better-than-expected industrial production report, the market faltered in afternoon trade on Friday following a weak trend in Europe and ended the day with notable losses. The Sensex ended 130 points down that day, while the Nifty closed lower by 32 points.

Infosys, which declined sharply on Friday following a weak earnings forecast issued by the company, ended the week with a loss of around 5.2%.

Infosys Limited reported a 3.49% surge in net profit at Rs 2369 crore for the quarter ended 30 September 2012, but cut both revenue and earnings guidance for fiscal 2013 due to the rupee's surge against the U.S. dollar. The IT major has forecast a 17.3% growth in revenue for FY 2013, lower than what a forecast for a 19.7% rise it had made in July this year.

Among other IT majors, Wipro ended nearly 6% down and Tata Consultancy Services, which came back strongly after initial weakness on Friday, closed the week with a modest loss of around 0.4%.

Among bank stocks, HDFC Bank ended 1.4% up, with strong quarterly numbers aiding its surge. The bank said net profit rose 30.06% to Rs 1559.98 crore on 24.47% growth in total income to Rs 9869.8 crore in Q2 September 2012 over Q2 September 2011. The bank said its asset quality remains healthy.

ICICI Bank and State Bank of India drifted down by 2% and 3.8%, respectively. State Bank of India's stand-alone credit profile rating was downgraded by rating agency Standard & Poor's due the bank's weak asset quality performance.

Capital goods stock BHEL lost around 6.8%, due largely to profit taking after the previous week's stellar gains. Reliance Industries declined by 4.4%. During the week, the company signed a 15 year heavy crude oil supply contract and MoU with Petroleos de Venezuela for further development of Venezuelan heavy oil fields.

Automobile stocks Mahindra & Mahindra, Maruti Suzuki, Tata Motors and Hero Motocorp lost 1% - 4%. Bajaj Auto ended with a modest loss.

Sun Pharmaceutical Industries, Tata Steel, ITC and Hindustan Unilever ended the week with notable gains.

India's merchandise exports fell 10.78% to $23.69 billion in September 2012, data released by the Ministry of Commerce & Industry on Thursday, 11 October 2012, showed. Imports rose 5.09% to $41.77 billion. Oil imports jumped 30.74% to $14.09 billion whereas non-oil imports declined 4.46% to $27.68 billion. The trade deficit surged sharply to $18.08 billion in September 2012 from $13.19 in September 2011. Trade deficit declined to $89.25 billion during the six month period April-September 2012 from $89.39 billion during the six month period April-September 2011.

According to the data released by the government on Friday, the Index of Industrial production (IIP) for the month of August grew at a robust 2.7% beating forecasts. According to revised estimates, the index had grown at a meagre 0.2% in July .

The manufacturing sector grew at 2.9% as against a contraction of (-) 0.2% in July. The mining sector grew at 2% emerging from its contraction of (-) 0.7% in July. In the April-August period, industrial production expanded an annual 0.4%.

Meanwhile, inflation based on the consumer price index stood at 9.73 % in September 2012, lower than 10.03% in August 2012.

On Wednesday, the World Bank lowered its fiscal year economic growth forecast for India to 6% due to infrastructure problems and slow policy reform, and warned there is a high risk that growth could slow further if economic conditions in Europe deteriorate.

The International Monetary Fund, on its part, cut its 2012 GDP growth forecast for India sharply, to 4.9% from 6.1% estimated in July, and 6.8% in April. IMF has also cut GDP forecast for 2013 to 6% from its earlier forecast of 6.5% growth.

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