A Budget week to forget for D-St

The Sensex lost 938 points or 3.6% and the Nifty slumped 292 points or 3.8%

Benchmark share indices which had rallied to all-time highs finally succumbed to profit-taking amid lack of major reforms announcement in the Budget and the uncertainty over implementation of the controversial General Anti-Avoidance Rules (GAAR) led to a sell-off in the week ended July 11.

The Sensex ended down 938 points or 3.6 per cent at 25,024 posting its biggest weekly loss since December 2011, while the Nifty closed 292 points or 3.8 per cent at 7,460 recording its largest weekly loss since March 2013.

Selling pressure was also seen in the broader market with the BSE Mid-cap Index down 7 per cent and the Small-cap Index ended 7.8 per cent lower.

 

Finance Minister Arun Jaitley presented the Union Budget on July 10, promising to limit fiscal deficit at 4.1 per cent of GDP for the current financial year, raised the income-tax threshold for individual tax payers, hiked the foreign direct investment in insurance and defence sectors to 49 per cent and also proposed to sell partial stake in state-owned banks.

Industrial output in May grew by 4.7 per cent, the highest monthly rise since October 2012, giving further momentum to a 3.4 per cent rise in April and raising hope of a recovery. Stocks from sectors such as Capital Goods, Power, Realty, Bankex, Oil and Gas, Auto and Metal indices, which had surged in the run-up to the Budget, were among the most hit while the defensive IT and FMCG indices ended with marginal gains.

The BSE Power Index was the top loser down 10.2 per cent followed by Capital Goods Index 10 per cent, Realty Index  9.2 per cent, Consumer Durables Index 8.2 per cent, Metal and Bankex down over 7 per cent each while the Auto, Oil and Gas indices ended nearly 6 per cent lower.

Investors also booked profits in capital goods and auto shares, which had surged after the government extended an excise duty concession by six months till December 31 this year. State-owned BHEL was the top Sensex loser during the week under review down 15 per cent, while engineering major L&T closed 10.3 per cent lower.

Auto shares, which had gained post-June sales numbers also witnessed profit-taking. Bajaj Auto, Hero MotoCorp, Maruti Suzuki, M&M ended down 5-7 per cent each.

State-owned banks also faced selling pressure after the Budget proposed to reduce its stake in the public sector banks. SBI ended down 10.3 per cent, Punjab National Bank eased 10.8 per cent, while Bank of Baroda ended 10.6 per cent lower. Among the private banks, ICICI Bank ended down 7.3 per cent, Axis Bank fell 6.2 per cent and HDFC Bank ended down 5.2 per cent.

Power stocks also witnessed profit-taking after sharp gains recently. PTC India, Reliance Infra, Reliance Power, Tata Power, NHPC and NTPC ended down 1-8.5 per cent each.

After the Budget proposed specific excise duty on cigarettes in the range of 11-72 per cent, ITC ended up 3.8 per cent.

Infosys ended up 2.7 per cent  after the company reported a better-than-expected consolidated net profit at Rs 2,886 crore for the first quarter ended June 30 (Q1). Analysts, on an average, had expected profit of Rs 2,698 crore for the quarter. The company had reported a profit of Rs 2,992 crore in the March 2014 quarter.

Some of the mid-cap shares which witnessed a sell-off include, Unitech, Apollo Tyres, Andhra Bank, RCF and Jain Irrigation down 19-23 per cent each. In the small-cap segment, Texmaco Rail, TBZ, PC Jewellers and Bombay Dyeing ended down 17-28 per cent each.

Week ahead
Corporate earnings will be in focus with TCS, Bajaj Auto, Kotak Mahindra Bank set to announce their first quarter earnings among others.

Foreign investors were net sellers in equities of over 700 crore on Friday. Further selling could weigh on investor sentiment.The government will also announce the rate of inflation based on the wholesale price index for the month of June 2014 on Monday.