The Indian stock market suffered one of its worst setbacks in recent years on Friday (16 August 2013), as the bears turned extremely relentless and kept hammering down stocks following the rupee plunging to a new all-time low against the U.S. dollar.
Lingering concerns about growth and some disappointing results from India Inc for the quarter ended June 2013 too contributed to the slide to a significant extent. As nervous investors chose to exit counters, irrespective of the quality of stocks, the BSE benchmark Sensex ended with a staggering loss of around 770 points or almost 4%, on Friday.
The Reserve Bank of India's decision to curb gold imports and capital outflows to stem rupee's slide, spooked the market. On Wednesday, the central bank limited the investment Indian companies can make overseas without seeking its approval to 100% of their net worth, as against the earlier limit of four times of their networth.
The RBI also reduced the amount that people living in India can send abroad to $75,000 a year from $200,000. Further, it said the remittances cannot be used for buying property abroad. However, the central bank has exempted large state-run companies from this restriction.
During the trucated week (the market was closed on Thursday, August 15, for Independence Day), the Sensex lost 191 points or a little over 1%, ending at 18,598, while the Nifty, which lost around 235 points or over 4% on Friday, ended the week with a loss of around 58 points or 1.03% at 5508. The Sensex and Nifty closed at their levels since 26 June 2013 and 9 April 2013, respectively.
Midcap and smallcap stocks outperformed the big ones last week. While the BSE Midcap index moved up by 0.55%, the Smallcap barometer ended the week with a gain of around 0.7%.
Despite the terrible setback on Friday, the weekly loss was less pronounced, as the market had posted handsome gains in the other three sessions .
On Monday, the Sensex rose more than 150 points, with several front line stocks surging higher on positive global cues. A rating upgrade of FMCG heavyweight ITC too aided sentiment to a notable extent that day.
The rupee's recovery following the government raising import duty on gold to cut dollar outflows lifted sentiment on Tuesday, and lifted the Sensex up by an impressive 283 points or 1.5% on Tuesday.
As several blue chips extended their gains, the market saw another good outing on Wednesday, with the Sensex gaining 138 points to settle at its best closing mark since 29 July 2013.
And then, on Friday, stocks went on a free fall, with the mood turning extremely bearish following the central bank's curbs on forex outflows to stem the Indian currency's slide. Speculation that the U.S. Federal Reserve will start winding up its stimulus program too weighed on sentiment to a significant extent. Fears of a likely rate hike added to the woes.
Index heavyweight Reliance Industires ended the week with a loss of over 4.5%. Banking sector major State Bank of India (down 5.4%) tumbled on disappointing results. Besides ICICI Bank (down 1.9%) and HDFC Bank (down 3.5%), several other bank stocks, including Axis Bank, Yes Bank, Bank of India, Bank of Baroda, PNB, IndusInd Bank and Kotak Bank, also ended the week with sharp losses.
Power stock Tata Power (down 5.7%) declined sharply. Metal stocks saw some good spells in positive territory, thanks to fairly encouraging economic data from China. Tata Steel notced up over 7.5% after the company said its consolidated net profit rose over 90% in the April - June 2013 quarter. Jindal Steel & Power gained 2.8% and Hindalco advanced 2.2%.
Among automobile stocks, Maruti Suzuki closed 4.4% down and Mahindra & Mahindra ended lower by 2.7%. Bajaj Auto moved up 3.5% following striking workers at the company's Chakan plant deciding to resume duty. Hero Motocorp closed with a strong gain of 7.2%, and Tata Motors spurted 12.5%, despite the company reporting a notable drop in vehicles sales in July 2013.
Thanks to a weak rupee, information technology stocks had a few good spells last week. Sector bellwether Infosys ended higher by a modest 0.05%. Wipro surged up 2.2% even as Tata Consultancy Services ended the week on the negative side, losing a little over 3.5%.
Sun Pharmaceutical Industries jumped almost 7% following the company's net profit for the first quarter rising as much as 56%. to Rs 1241 crore, from the prior corresponding quarter.
According to the data released by the government on Monday (12 August), India's industrial output contracted 2.2% in June 2013. Mining production registered a decline of 4.1% and manufacturing production fell 2.2%, while electricity generation remained stagnant in June 2013. Production of basic goods declined 1.9% in June 2013. Capital goods production was down 6.6% and production of intermediate goods rose 1.1% Consumer goods production declined 2.3%. Production of consumer durables declined 10.5%. Production of consumer non-durables rose 5%. On a cumulative basis, industrial production registered a contraction of 1.1% during April-June 2013.
Meanwhile, inflation based on the consumer price index eased in July 2013. According to the data released by the government on 12 August, the combined consumer price index for urban and rural India eased to 9.64% in July 2013, from 9.87% in June 2013. The ‘food and beverages' inflation stood at 11.24% in July 2013.
A report from the government, released on Wednesday, showed inflation based on the wholesale price index accelerated to 5.79% in July 2013, from 4.86% in June 2013. Fuel and power group mainly contributed to increase in inflation in July 2013. Meanwhile, the government revised downwards inflation for May 2013 to 4.58% from the 4.7% reported earlier.
Additonally, India's trade deficit declined sharply in July 2013 (year-on-year). Merchandise exports jumped 11.64% to $25.83 billion in July 2013 over July 2012, while total imports declined 6.2% to $38.10 billion in July 2013 over July 2012.