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Markets in free fall after poll vault; Sensex down 281 pts

business Updated: Dec 14, 2013 18:35 IST
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Markets started the week with a bang as both the key indices, Sensex and Nifty, logged new intra-day peaks on Monday spurred by BJP's victory in assembly polls but later succumbed to selling and ended in the red.

The Sensex opened strong at 21,416.67 and rose to an all-time peak of 21,483.74 after the BJP's poll win in three states sparked optimism about the main opposition party's chances in general elections next year.

Afterwards, the 30-share index encountered strong resistance and fell for the next four days. The BSE barometer lost 280.95 points, or 1.34%, over the last weekend's close to settle at 20,715.58. The diversified index scaled historic closing high of 21,326.42 on Monday.

Speculation that US Federal Reserve may soon start cutting back on its stimulus programme, which has proved a boon for emerging markets, including India, and a host of domestic factors severely dented investor sentiment and led the market to snap a two-week rally.

The situation worsened further on Friday after weak factory output data and rise in retail inflation fuelled fears that RBI may hike key interest rates in its December 18 policy meeting.

The Sensex had gained 779.14 points, or 3.85%, in the previous two weeks.

The NSE 50-share Nifty also rose to an all-time high of 6,415.25, but declined afterwards to 6,161.40 before ending the week at 6,168.40, showing a loss of 91.50 points or 1.46%. The key index had gained 264.15 points, or 4.41%, in the last two weeks.

Fall in the rupee value to two-week closing low of 62.12 against the dollar on Friday also weighed on the market.

The market reacted negatively to hawkish comments on inflation from RBI governor Raghuram Rajan as it triggered speculation that he will raise the key lending rate next week.

The Index of Industrial production (IIP) contracted 1.8% in October as compared to an expansion of 1.96% in September and 8.4% a year earlier.

Inflation, as measured by the consumer price index (CPI), rose to a nine-month high of 11.24% in November from 10.17 in October, making it harder for the Reserve Bank to lower interest rates at its upcoming monetary policy meet.

Shares of power, capital goods, consumer durable, auto, banking and realty sectors were the main losers of the week, while IT and FMCG segments notched gains.

Barring Japan, other key Asian markets closed in negative following fall on the Wall Street during the week which also put pressure on the Indian bourses.

According to analysts, the markets settled down after the initial euphoria on Monday.

"The mood in the markets was a bit sombre for the better part of the week after the euphoria on the first trading day, triggered by positive mandate given to BJP in the State elections," said Jignesh Chaudhary, Head (Research), Veracity Broking Services.

"Thereon markets traded weak for four consecutive days following a negative trend in global markets on anticipation of a near-term intervention by Fed in the bond purchase programme," he added.

"On the domestic front, a weak rupee, negative IIP numbers and high inflationary numbers did not give any credence to the markets to cheer about. Markets finally ended negative at close on Friday, almost 600 points below its high on Monday.

"There are two important data points which are scheduled to be released next week, which the markets are keenly watching. If FED during its meeting next week, proposes some more near term dates for ending the stimulus program, Indian markets are definitely going to witness some severe jolts next week.

"The technical indicators are suggesting bearish trend and the BSE Sensex is expected to trade in the range of 20,660 to 20,756 and CNX Nifty is expected to trade in the range of 6,000 to 6,150," he added.

Meanwhile, Foreign Institutional Investors (FIIs) invested a net Rs 4,595.08 crore during the week including the provisional figure of December 13.

23 stocks out of the Sensex pack ended lower while others finished higher.

Major losers from the Sensex pack were BHEL (10.65%), Jindal Steel (9.16%), NTPC (8.25%), SBI (6.78%), Tata Motors (5.60%), Bharti Airtel (5.43%), ICICI Bank (5.28%), ONGC (5.03%), L&T (4.48%), Cipla (2.80%), Gail India (2.68%), Bajaj Auto (1.98%), Sun Pharma (1.93%), Tata Steel (1.73%), Hero MotoCorp (1.63%), Hindalco (1.56%) and Tata Power (1.32%).

However, Wipro rose by 4.93% followed by SSLT (4.90%), Infosys (1.40%) and HDFC Bank (1.17%).

Among the S&P BSE indices, Power dropped by 4.60%, CG (4.15%), CD (3.21%), Bankex (2.95%), Auto (2.14%), Oil & Gas (1.94%), Realty (1.88%), HC (1.05%) and Metal (1.00%) while IT index rose by 1.61%.

The total turnover at BSE and NSE fell to Rs 9,744.50 crore and Rs 53,922.87 crore, respectively, during the week from Rs 9,960.86 crore and Rs 54,025.63 crore last week.

Forex: The rupee came off from four-month intra day high of 60.84 registered on Monday and closed down by 71 paise to end the week at a two-week low of 62.12 against the Greenback in line with fall in local equities and fresh dollar demand from importers amid weak macro-economic data, snapping three-week winning spree.

Sustained capital inflows, however, could not stem the rupee fall, a forex dealer said.

At the Interbank Foreign Exchange (Forex) market, the domestic currency resumed the week strong and touched an intra-day four-month high of 60.84 - a level not seen since August 12, 2013 when it had logged a high of 60.45 - following firm local equities after BJP won three out of four state Assembly elections.

Investors welcomed the party open heartedly, expecting them to win the next general elections to be held in May next year and widely seen as more stable and business friendly.

Later, renewed fears of the US Federal Reserve tapering its stimulus programme earlier than expected, a firm dollar overseas and sluggish domestic stocks weighed on the rupee and it fell back to a low of 62.28 before settling the week at 62.12, showing a fall of 71 paise or 1.16%. In last three weeks in a row, it had spurted by 170 paise or 2.69%.

Rating agency Fitch on Tuesday said the setback faced by Congress in state elections could potentially raise political pressure on the government's near-term fiscal goals. It could mean an increasing likelihood of political pressure to limit expenditure cut-backs.

The benchmark BSE S&P Sensex plunged by 280.95 points or 1.34% during the week while FIIs injected USD 821 million on the first four days of the week, as per Sebi data.

Meanwhile, the Index of Industrial production (IIP) contracted 1.8% in October as compared to an expansion of 1.96% in September and 8.4% a year earlier.

Inflation, as measured by the consumer price index (CPI), rose to a nine-month high of 11.24% in November from 10.17 in October, making it harder for the Reserve Bank to lower interest rates at its upcoming monetary policy meet.

Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said, "To start the week, the rupee rose to four month high, but soon fell back to post first weekly loss in four weeks. The disappointing IIP data further depreciated the rupee. The trading range for the USD/INR pair for the week is expected to be within 61.50 to 63.50." The rupee premium for the forward dollar ended mixed on alternate bouts of buying and selling.

The benchmark six-month forward dollar premium payable in May finished lower at 246-248 paise from last weekend's close of 248-250 paise, while far-forward contracts maturing in November moved up to 489-491 paise from 485-487 paise.

The RBI fixed the reference rate for the US dollar at 62.1266 and for the euro to 85.4135 from 61.6673 and 84.2546 last weekend, respectively.

The rupee fell back sharply against the pound sterling to 101.14 from last weekend's close of 100.47 and also tumbled against the euro to 85.31 from preceding weekend's close 83.98, while it firmed up further against the Japanese yen to 59.92 per 100 yen from preceding weekend's close of 60.16.

Oils and oilseeds: Edible oils weakened while industrial oils firmed up at the oils and oilseeds market during the week under review.

Groundnut oil traded sluggish during the week, witnessing stockist selling as well as subdued retail demand on the back of ample supply positions.

Refined palmolein also fell due to lack of retail buying support amid bearish Malaysian advices.

Linseed oil gained at the fag end trade owing to good demand from paint and allied industries.

Castorseeds bold and castoroil commercial surged following heavy demand from shippers and soap industries.

Castorseeds futures for December contracts also climbed with heavy speculative offtake in the backdrop of consistent export orders.

In the edible oils segment, groundnut oil opened steady at Rs 850, later dropped further to close at Rs 820 from previous weekend level of Rs 850, showing fall of Rs 30 per 10 kg.

Refined palmolein opened slightly higher at Rs 597, but later drifted lower to close at Rs 585 from preceding weekend's level of Rs 596, showing a loss of Rs 11 per 10 kg.

In the non-edible section, castorseeds bold resumed higher at Rs 3,875 and rallied further to finish at Rs 4,250 from last weekend's level of Rs 3,850, showing a net gain of Rs 400 per 100 kg.

Castoroil commercial also opened up at Rs 805 and advanced further to end at Rs 880 from preceding weekend's level of Rs 800, displaying a rise of Rs 80 per 10 kg.

Linseed oil resumed stable at Rs 820, later moved up to settle at Rs 825, showing a gain of Rs 5 per 10 kg.

Moving to the futures section, castorseeds for December delivery resumed slightly lower at Rs 4,045 and traded between a high of Rs 4,388 and a low of Rs 4,035 before concluding at Rs 4,378 from last Saturday's closing level of Rs 4,048, showing a smart gain of Rs 330 per tonne.