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Markets worldwide witnessed selling pressure last week on risk aversion amid Ukraine concerns and growth worries in China. A standoff between Russia and Ukraine over the Crimean region weighed on the investors sentiment who now await a weekend referendum that might lead to Crimea’s secession from Ukraine to join Russia.
China’s industrial output, investment and retail sales growth slowed more than expected in the months of January and February, signaling a slowdown in the world’s second largest economy.
In India too benchmark stock indices slid reflecting the global sentiment. However, a consistent fall in inflation over the last two months along with an expansion in industrial output gave hope to foreign investors, who continued their buying spree this week. FIIs remained net buyers in equities worth Rs 1,993 crore, according to provisional Sebi data.
The 30-share BSE Sensex index shed almost 110 points or 0.6 per cent to close at 21,810 levels, after touching an all-time high of 22023.98 in the week ended March 14. (Click for table & charts)
Meanwhile, the 50-unit Nifty, after touching its life high level of 6562.85, closed 22 points or 0.3 per cent lower at 6,504 levels.
Macroeconomic booster & risks
Crucial macroeconomic data, released this week, showed industrial output (IIP) grew 0.1 per cent in January, after four months of contraction. Also, Consumer Price Index (CPI) inflation in February dipped to its 25-month low of 8.1 per cent on back of a marked decline in food prices, while the Wholesale Price-Index (WPI) inflation print followed suit, declining to a nine-month low of 4.7 per cent.
Market participants now expect the Reserve Bank of India (RBI) to keep interest rates stable at current levels owing to softening of inflation figures. But it’s too early to rejoice says a BoFA-ML report, which says CPI inflation will climb back to 8.4 per cent levels in March.
“The bad news is that CPI inflation will likely climb back to 8.4 per cent in March with vegetable prices going up again on a hailstorm. The ugly news is that El Nino risks are rising: Five per cent increase in food prices impacts CPI inflation by 250bp. On balance, we expect RBI to pause on April 1,” says the report.
Sectors & stocks
Among BSE indices, which track various industrial sectors, BSE IT was off six per cent during the week. A sharp fall in Infosys pulled the benchmark Sensex lower this week. The index heavyweight fell around nine per cent after the management hinted at weakness in client spending in the January-March quarter, and that the company might only be able to meet the lower end of its annual revenue growth guidance for FY14 of 11.5-12 per cent.
Metal and Healthcare indices were down 4.82 per cent and 1.7 per cent respectively. Metal shares slumped on poor Chinese trade data. China is the biggest importer of base metals. Tata Steel, Sesa Sterlite and Hindalco lost around eight percent.
BSE Capital Goods Index was the top gainer, up 3.5 per cent, followed by Bank, Realty, Oil & Gas and FMCG.
Sun Pharmaceutical stock, which plunged four per cent to Rs 581.75 as its plant at Karkhadi, Gujarat, received an import alert from the US Food and Drug Administration (FDA).
Larsen & Toubro (L&T) was up 4.84 per cent to Rs 1,255.50 after its announcement to sell 5.55 crore equity shares of L&T Finance Holdings through an Offer for Sale (OFS).
The coming week is a truncated one with a holiday on Monday on account of Holi. The global cues especially developments in Ukraine will be closely watched.
