 "No fireworks for markets; All eyes on Bihar")
Ahead of the festival of lights, markets missed out on the Diwali dazzle, as the uncertainty surrounding two major events — Bihar exit poll outcome and US Fed comment indicating an interest rate hike — marred the sentiment. Registering losses for the second straight week the benchmark Nifty settled below the crucial mark of 8,000 amid profit booking by foreign institutional investors after lower-than expected earnings by major companies.
In the week to November 6, the markets finished at the lowest level since October 1, with Sensex dropping 392 points or 1.5 per cent to settle at 26,265, while the Nifty lost 112 points or 1.4 per cent to end at 7,954. In the broader markets, the BSE Mid-cap Index shed 1.4 per cent and the BSE Small-cap Index lost 2.3 per cent.
MARKET VIEW & OUTLOOK
“In the last two weeks, there has been a remarkable divergence in the way the global equity markets have performed and Indian markets. in On one hand, the US indices have rallied almost 2-3 per cent while Indian markets have corrected by almost 5 per cent. On the other hand, our markets are nearing their 2015 lows while the US indices are few percentage points away from their lifetime highs. The disappointment in earnings for many key frontline stocks including few private sector banks, muted performance from IT names and lot of earnings miss from midcap universe along with confusion regarding the outcome of Bihar State elections are few key reasons for this underperformance" said Kunal Bothra, Head - Advisory, LKP Securities.
"From a traders’ perspective, there is hardly any key sector emerging as support point for the markets. Weakness in large cap names such as L&T, Axis Bank, IT and Pharma majors have brought about renewed jitters in the markets. I believe that for the markets to bottom, rather than a technical support, it would need first its key internal sectors to start stabilizing and then get into an outperformance mode. Once the engines start firing, only then we believe that the bulls could resume a fight back, till then it would be a phase of correction. Whether Bihar elections outcome provides the impetus, is something to watch for. Technically for Nifty, the major supports are at 7,720 and resistance at 8,180 on spot levels. A break of either band could trigger broad trend for the indices. Bank Nifty has support at 16,250 and resistance at 17,780 on spot levels." he added.
KEY EVENTS
Exit polls at the end of five- phased polling in Bihar assembly elections on Thursday indicated a close fight between BJP-led National Democratic Alliance (NDA) and the JD(U)-RJD-Congress Grand Alliance. The final results of the Bihar election will be out on Sunday, November 8.
On the macro front, a monthly survey indicated further drop in the growth momentum across the Indian manufacturing sector in October with Nikkei Manufacturing PMI slipping to 50.7 in October from September's 51.2.
On the contrary, India’s services industry expanded at its fastest pace in eight months in October as new business rose with discounting probably stoking demand with Nikkei Services PMI rising to 53.2 in October from September’s 51.3.
On the global front, China's factory activity declined for the eighth straight month in October citing weakness in the world's second-largest economy.
EARNINGS REVIEW & KEY MOVERS
GAIL fell 6.5 per cent after it posted a 66 per cent decline in net profit for the quarter ended September on the back of lower price realisation in transmission of LPG and other petroleum products.
BHEL dropped 3.5 per cent on reporting a net loss of Rs 204.90 crore in Q2 September 2015 compared with net profit of Rs 124.84 crore in Q2 September 2014.
Vedanta cracked 8 per cent after it reported widening of its net loss to $324.5 million in the first half of the current financial year as the mining conglomerate faced challenging commodities market.
Tata Motors reported consolidated net loss of Rs 429.8 crore compared to a net profit of Rs 3,290.10 crore. However, the stock ended up 3 per cent on better-than-expected JLR sales in the US.
Cipla posted a net profit jump of 44.38 per cent to Rs 431.24 crore on 24.64 per cent rise in total income to Rs 3478.33 crore in Q2 September 2015 over Q2 September 2014. However, it lost 4.6 per cent as the earnings came below the street expectations.
Sun Pharma slumped 9.6 per cent after its US subsidiary Taro Pharma posted weak Q2 September 2015 earnings.
SBI gained 2.5 per cent after it posted a 25 per cent rise in stand-alone net profit at Rs 3,879.07 crore for the second quarter ended September on the back of decline in non-performing assets.
M&M reported 2.43 per cent drop in standalone net profit at Rs 923.56 crore for the second quarter ended September 30 compared with Rs 946.63 crore in the same quarter last fiscal. However, the stock jumped 5.5 per cent on posting a 20 per cent jump in total sales at 51,383 vehicles in October.
Tata Steel crashed 11 per cent on weak sales number in second quarter earnings on the back of lower expenses and higher other income.
Dr Reddy’s Lab slumped 14.5 per cent and emerged as the top loser after the company received a warning letter issued by the USFDA dated November 5 pertaining to its API manufacturing facilities in Srikakulam in Andhra Pradesh and Miryalaguda in Tamil Nadu and also at its Oncology formulation manufacturing facility located in Duvvada in Andhra Pradesh.
IDFC Bank, subsidiary of IDFC was listed on the stock exchanges at Rs 70.50 apiece on Friday and ended at Rs 70.40 apiece.
WEEK AHEAD
Investors will closely monitor the final outcome of the assembly election in Bihar on Sunday, November 8.
The final batch of September quarterly results due next week will be keenly watched by the market participants. Britannia, Sun Pharma, BPCL, HPCL, REC, Hindalco, NMDC, NALCO and Coal India are scheduled to release their Q2 numbers in the coming week.
The government is scheduled to unveil the CPI data for October and the IIP data for September on Thursday, respectively.
Markets will remain closed on Thursday, 12 November 2015 on account of Diwali Balipratipada.