 "Markets to closely watch Q3 earnings, macro data")
The first complete trading week of 2016 was disastrous for Indian stocks. Both the Sensex and Nifty recorded their worst weekly performance since November 2011. The plunge was in tandem with sell-off in global stocks after further depreciation of the yuan rekindled fears that the world's second largest economy is slowing more than expected. Further, weakening crude oil prices and the geopolitical tensions in West Asia also dampened investor sentiment.
The S&P BSE Sensex tanked 1,227 points, or 4.7 per cent, to finish at 24,934 after hitting a 52-week low of 24,825.70 intra-week and the Nifty50 tumbled 362 points, or 4.5 per cent, to settle at 7,602. Meanwhile, the BSE Midcap and Smallcap indices fell two per cent each.
“The Nifty hit the resistance level of 8,000 and reversed its up move in the short term. Till the time market finds its levels, it can be safe to stay on the side lines, as it continued to make lower tops and lower bottoms and on the last count a double bottom. If 7,550 levels are broken, Nifty can go lower for some more time. Therefore, traders are advised to wait and watch, where as investors should commit purchases,” said Jimeet Modi, chief executive of SAMCO Securities.
China meltdown
Chinese markets witnessed a turbulent week with the China's benchmark index Shanghai Composite cracking seven per cent. The tremors were felt across the globe. The People’s Bank of China (PBOC) set the yuan's daily reference rate at the lowest level since April 2011, as its domestic economy, particularly manufacturing, shows no signs of picking up, with the December manufacturing data contracting for a 10th consecutive month.
The S&P BSE Sensex tanked 1,227 points, or 4.7 per cent, to finish at 24,934 after hitting a 52-week low of 24,825.70 intra-week and the Nifty50 tumbled 362 points, or 4.5 per cent, to settle at 7,602. Meanwhile, the BSE Midcap and Smallcap indices fell two per cent each.
“The Nifty hit the resistance level of 8,000 and reversed its up move in the short term. Till the time market finds its levels, it can be safe to stay on the side lines, as it continued to make lower tops and lower bottoms and on the last count a double bottom. If 7,550 levels are broken, Nifty can go lower for some more time. Therefore, traders are advised to wait and watch, where as investors should commit purchases,” said Jimeet Modi, chief executive of SAMCO Securities.
China meltdown
Chinese markets witnessed a turbulent week with the China's benchmark index Shanghai Composite cracking seven per cent. The tremors were felt across the globe. The People’s Bank of China (PBOC) set the yuan's daily reference rate at the lowest level since April 2011, as its domestic economy, particularly manufacturing, shows no signs of picking up, with the December manufacturing data contracting for a 10th consecutive month.
“The sudden fall in the market may have shied away bulls from the market for the time being, as it was getting ready for a rally but the China syndrome suddenly created a roadblock. The market will move in a narrow range till the dust is settled. However, buying will emerge at lower levels, as the valuations are attractive. Markets are expected to remain range bound, with some amount of buying happening at lower levels,” He added.
Crude oil
Crude oil prices fell to 12-year lows during the week due to supply glut and bleak demand outlook in the market. Crude oil settled at $32 per barrel on Friday.
Key stocks
All sectoral indices closed in red, with BSE Auto index cracking seven per cent. 28 out of 30 stocks from the 30-share Sensex pack ended lower with Adani Ports, Larsen & Toubro and Bharat Heavy Electricals Ltd losing between eight per cent and 10 per cent. However, some relief rally was seen across the oil and gas space, with Reliance Industries and GAIL managing to settle with gains.
Tata Motors declined 12 per cent because of worries about demand from China — a key market for Tata Motors’ British luxury car unit Jaguar Land Rover (JLR). Meanwhile, Maruti Suzuki plunged nine per cent on concerns that margins could be hurt because of appreciation of the yen. Among other peers, Mahindra & Mahindra, Hero MotoCorp and Bajaj Auto slipped between five and seven per cent.
The Metal pack also got battered during the week, as demand from China, the world's largest consumer of metal, looks bleak. Vedanta, Hindalco and Tata Steel cracked 9-12%.
Banks, which are a proxy to the economy, declined amid weak December manufacturing PMI quoting at 28-month low of 49.1. Axis Bank, HDFC Bank, ICICI Bank and State Bank of India dropped between three per cent and 10 per cent.
Week ahead
Macroeconomic data, third quarter results, global trends, movement of the rupee against the dollar and crude oil price movement will dictate trend on the bourses. The results season will start next week, with IndusInd Bank and Tata Consultancy Services (TCS) announcing their results on Tuesday. In addition, Infosys will announce its results on Thursday. Among other notable companies, Hindustan Unilever Ltd, Zee Entertainment and Kotak Mahindra Bank will post their earnings next week.
Meanwhile, markets are likely to react to the influential monthly US non-farm payrolls report for December 2015.
On macro front, IIP for November 2015 and CPI for December 2015 will be announced on Tuesday. Further, WPI for December 2015 will be unveiled on Thursday.