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Weekly Review: Markets end 3-week losing streak

Tulemino Antao/Mumbai 04 Aug 12 | 10:00 AM

Benchmark share indices ended their three-week losing streak, amid bargain hunting in fundamentally sound stocks, to gain over 2% higher in the week to August 3.

The 30-share Sensex gained 2.1% to close at 17,198 while the 50-share S&P CNX Nifty surged 2.3% to close at 5,216.

However, the broader markets outperformed the benchmark indices with both the BSE Mid-Cap index and BSE Small-Cap index gaining 3% each.

The Reserve Bank of India, at its first quarter monetary policy review meet on Tuesday, left interest rates unchanged for the second time since June, in line with expectations, while cutting its growth forecast and lifting its inflation outlook as economic conditions deteriorate. The RBI kept its policy repo rate unchanged at 8% and left the cash reserve ratio (CRR) for banks at 4.75%. CRR is the share of deposits banks must keep with the RBI. However, the central bank reduced the statutory liquidity ratio by 100 basis points to 23% from 24%.The RBI also cut its economic growth outlook for FY13 to 6.5%, from the 7.3% assumption made in April, putting its outlook closer to that of many private economists. It also raised its headline inflation projection for March 2013 to 7%, from 6.5% in its April review.

Further, the US Federal Reserve, on Wednesday, offered no new measures to boost the economy while the European Central Bank also followed suit on Friday after it kept key policy rates unchanged.

India's manufacturing activities expanded last month at the slowest pace in eight months, the HSBC Purchasing Managers’ Index (PMI) showed. The index fell sharply to 52.9 points in July against 55 points in June. Before that, PMI was lower in November 2011, when it was at 51 points. A reading above 50 points denotes expansion and below that level is contraction.

The India Meteorological Department (IMD) on Friday, for the first time, officially hinted at a drought-like situation, saying the southwest monsoon over India in 2012 is likely to be deficient at below 90 per cent of the Long Period Average (LPA).

The gains during the week were led by power related shares along with pharma and index heavyweights Reliance Industries and Infosys.

NTPC was the top Sensex gainer ending the week with 8.7% gain. NTPC surged following Coal India's agreement this week to supply 80 percent of the coal needed to fuel new power projects eased concerns about supply of the key raw material. Further an optimistic note about its profit outlook in a conference call after market hours on Wednesday also boosted sentiment for the stock.

BHEL surged 7.9% on the back of better-than-expected earnings reported last week. The state-owned engineering major registered better-than-expected 13% year-on-year (yoy) growth in net profit at Rs 921 crore for the quarter ended June 2012. Analysts, on an average, expected a net profit of Rs 786 crore from the state-owned capital goods company. The company said it has an outstanding order book position of Rs 1.33 lakh crore at end of June quarter.

Larsen & Toubro gained 4.7% on the back of improved order book position in the June quarter.“The company has seen 21% y-o-y growth in its order inflow at Rs 19.594 crore, have order book position at Rs 153,095 crore as at June 30, 2012," L&T said in a filing.

Tata Power ended up 2.8%. The country's largest private electricity producer Tata Power Friday said there cannot be a better trigger than this week's grid failures to speed up reforms for ushering in more investments into the sector.

Cipla surged 7.2% after reporting a better-than-expected 59 % year-on-year (yoy) growth in net profit at Rs 400 crore for the quarter ended June 2012, on the back strong domestic growth and exclusive revenues from supply of generic version of anti-depressant drug Lexapro to Teva. Among other pharma shares Sun Pharma ended up 4.7% ahead of its Apr-Jun earnings on August 10 while Dr Reddy's Labs gained 3.1%.

Index heavyweights Reliance Industries and Infosys witnessed short covering and value buying at lower levels after the correction in both the stocks in the past few weeks post their first quarter earnings. Both stocks gained around 3% during the week.

In the mid-cap segment prominent gainers include Bajaj Corp, BASF India and Jet Airways. Bajaj Corp jumped 16.5% after the personal products maker recently said its operating margins improved to 38.92% for the quarter ended June 2012 from 26.6% in the previous year quarter.

BASF India ended up 10.6%. The stock rallied after the diversified manufacturer of chemicals reported 36% year-on-year (yoy) jump in net profit at Rs 72 crore for the quarter ended June 2012, on the back of strong growth in sales. Net sales grew 27% at Rs 1,289 crore on y-o-y basis. On a sequential basis, net profit has surged almost nine-fold from Rs 7.98 crore in March quarter.

Jet Airways surged 16% after the company reported profits after five quarters of losses. Jet Airways Group flew back into the positive terrain with a net income of Rs 36.4 crore in the June quarter on the back of higher yields and cost management. The country's largest airline had posted a net loss of Rs 123.2 crore in the same period last year.
Jet Airways Friday said the profit would have been much higher had it not been for the huge forex losses on account of the falling rupee which resulted in an outgo of Rs 170.3 crore.

SpiceJet zoomed 26% after prominent investor Rakesh Jhunjhunwala bought 2.5 million shares at an average price of Rs 30.77 through open market transactions. The airline reported a net profit of Rs 56 crore for the quarter ended June 2012, after five successive quarters of losses. Analyst, on an average, expected loss of Rs 28 crore for the quarter. The private airlines had a net loss of Rs 71 crore in a year ago quarter.

Meanwhile, Deccan Chronicle was the stock of the week after it was hammered nearly 27% during the week. The company  witnessed selling pressure after Industrial Finance Corporation of India (IFCI) filed a winding up petition against DCHL in Andhra Pradesh High Court., on defaulting of non-convertible debentures. In a fresh round of bad news, the media report suggests that the Hyderabad-based financial services player Karvy group has filed a police complaint against the promoters of DCHL leveling allegations of forgery and misrepresentation, among other things.

Markets would look forward to industrial production data on August 9 while the rupee movement would be closed watched. Further, the drought-like situation would continue to weigh on market sentiment in the week ahead.

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