Markets advanced 0.3%, erasing weekly gains as investors booked profits because growth concerns in India and the west re-surfaced.
The Sensex commenced the week on an upbeat note; the index regained 17K and touched a high of 17,209 mid-week, outperforming the global indices as buying momentum continued. However, the rally lost steam on Friday, after three sessions of gains as United States President Barack Obama’s speech failed to entice investors. Investors booked profit ahead of the weekend as domestic growth concerns also intensified. The Sensex slipped below 17K and closed at 16,867, down 299 points and the Nifty ended at 5,060, down 93 points.
For the week, Indian markets outperformed the global indices; the Sensex was up 0.3% and the Nifty advanced 0.4%.
In Asia – Japan’s Nikkei Stock Average slipped 2.4%, Hong Kong’s Hang Seng declined 1.7% and South Korea’s Kospi fell 3% for the week. Concerns that policy makers could not come up with a concrete solution for crisis in Europe and slowdown in the United States weighed on the investors mind. President Barack Obama proposed $447 billion package to prop up unemployment, but Ben Bernanke steered clear from giving an indications of a stimulus package. Going forward global uncertainty may persists as the US congress debates over Obama’s stimulus package.
Stark signs of growth moderation were also seen at home. In India, the Purchase Managers Index showed slowdown in the services sector after a sharp contraction in the manufacturing sector. HSBC Holdings Plc and Markit Economics PMI index for services fell to 53.8 in August against 58.2 in July. PMI for manufacturing also slipped to low of 52.6 in August against 53.6 in July. SMC Research in the weekly report said, “The numbers suggest continuation of softness in domestic growth going into second quarter after first quarter GDP expansion came at 7.7%.”
Additionally, inflation for the week ended August 27 remained close to double digits raising expectations that the Reserve Bank of India will hike rates by another 25 bps during the September 16th policy. Besides the policy, markets will also take cues from IIP data, August inflation and advance tax numbers in the upcoming week. Technical analysts expect Nifty to outperform the global markets and scale to 5,350 levels in the near term.
On the sectoral front, the BSE metal and IT indices were the worst hit, down almost 1% each.
Investors continue to dump IT stocks on concerns that slowdown in Europe and US will cause the clients to cut their IT budgets. Midcap shares were the worst hit – Mphasis plunged over 4%, Patni Computers lost 3% and Infosys was down 2%.
Metal shares saw selling pressure after foreign brokerages cut targets on some of the stocks. JSW Steel lost sheen, down 5%, Bhushan Steel was off 4% and Hindalco fell 3%.
BSE Consumer Durables and Capital Goods sectors were the top gainers, up 5% and 3.5% each.
Buying emerged in the capital goods sector where valuations have become very cheap. Thermax zoomed 9%, Suzlon was up 8% and Larsen & Tourbo added 5%.
From Consumer Durables space – C Mahendra advanced 14%, VIP industries rallied 9% and Gitanjali Gems was up 8%.
Top gainers on the Sensex were JP Associates, Hero Motor Corp and Larsen & Tourbo, up between 5-9%. Major losers were Sun Pharma and DLF, down over 4% and ITC slipped 3%.
Among the heavyweights, Reliance Industries was in the lime light during the end of the week. RIL advanced 2.5% for the week, despite the Comptroller and Auditor General of India criticizing the company for revamping profit sharing arrangement. The company on Friday replied by saying there was no evidence to suggest that costs in development of the country's key natural gas fields were overstated.
From the broader markets, the midcap and the smallcap indices were up 2% each.