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Benchmark indices ended sharply lower on a weak monsoon forecast and Reserve Bank of India which raised its inflation forecast dimmed prospects of further rate cuts.
In the week to June 5, the Sensex settled at 26,769, lower by 1,060 points, or 3.8 per cent, and the Nifty finished at 8,115 levels, down by 319 points or 3.78 per cent. The BSE Mid-cap Index declined 3 per cent and the BSE Small-cap Index slumped 4 per cent to close in tandem with the larger peers.
Market view
“Markets ended the week with a near-4 per cent loss. Sentiments were weak due to the concerns over monsoons and Greece. Quarterly results have also not provided any cheer”, said Dipen Shah, head- private client group research, Kotak Securities. “Going ahead, the progress of monsoons will be closely watched, in addition to the reforms initiatives of the Government. Passage of important bills like GST are a pre-requisite for the markets to sustain and rise from current levels” he added.
“Global jitters including the much talked about Fed rate hike, expected to be in late 2015, along with the OPEC statement on Crude Oil are couple of factors, which could play out over the next few months, and can decide the trend for the medium term. In terms of market positioning,” said Kunal Bothra, head—advisory, LKP Securities.
Key events
RBI slashed the benchmark repo rate by 25 basis points to 7.25 percent which was in-line with expectations. Meanwhile, both Cash reserve ratio (CRR) and Statutory liquidity ratio (SLR) rates remained unchanged at 4 percent and 21.5 percent, respectively.
Also, the RBI cut the economic growth estimates for 2015-16 to 7.6 per cent from guidance of 7.8 per cent given in April 2015 highlighting uptick in global crude oil prices amid geopolitical concerns. The central bank also raised its inflation forecast for January 2016 to 6 per cent from 5.8 per cent.
The India Meteorological Department (IMD) downgraded the monsoon forecast to 88 percent of the long-term average as against the earlier forecast of 93 percent, raising fears of a drought. Meanwhile, monsoon hit Kerala on June 5, five days later than its normal date.
In the week to June 5, the Sensex settled at 26,769, lower by 1,060 points, or 3.8 per cent, and the Nifty finished at 8,115 levels, down by 319 points or 3.78 per cent. The BSE Mid-cap Index declined 3 per cent and the BSE Small-cap Index slumped 4 per cent to close in tandem with the larger peers.
Market view
“Markets ended the week with a near-4 per cent loss. Sentiments were weak due to the concerns over monsoons and Greece. Quarterly results have also not provided any cheer”, said Dipen Shah, head- private client group research, Kotak Securities. “Going ahead, the progress of monsoons will be closely watched, in addition to the reforms initiatives of the Government. Passage of important bills like GST are a pre-requisite for the markets to sustain and rise from current levels” he added.
“Global jitters including the much talked about Fed rate hike, expected to be in late 2015, along with the OPEC statement on Crude Oil are couple of factors, which could play out over the next few months, and can decide the trend for the medium term. In terms of market positioning,” said Kunal Bothra, head—advisory, LKP Securities.
Key events
RBI slashed the benchmark repo rate by 25 basis points to 7.25 percent which was in-line with expectations. Meanwhile, both Cash reserve ratio (CRR) and Statutory liquidity ratio (SLR) rates remained unchanged at 4 percent and 21.5 percent, respectively.
Also, the RBI cut the economic growth estimates for 2015-16 to 7.6 per cent from guidance of 7.8 per cent given in April 2015 highlighting uptick in global crude oil prices amid geopolitical concerns. The central bank also raised its inflation forecast for January 2016 to 6 per cent from 5.8 per cent.
The India Meteorological Department (IMD) downgraded the monsoon forecast to 88 percent of the long-term average as against the earlier forecast of 93 percent, raising fears of a drought. Meanwhile, monsoon hit Kerala on June 5, five days later than its normal date.
Key stocks
On the sectoral front, 11 out of 12 sectoral indices ended in the negative territory with BSE Realty index losing the most with a declined of over 8 percent.
Rate sensitive stocks including financials, auto and realty declined across the board after RBI indicated that it would wait for data on monsoon forecast and keep a watch on inflation before further easing of key policy rates. Among financials, Axis Bank, HDFC twins, SBI and ICICI Bank declined between 3-10 percent. In the auto pack, Bajaj Auto, Tata Motors, Hero Motocorp and M&M dipped between 4-9 percent. In the realty space, Unitech, HDIL, Indiabulls Real Estate, Oberoi Realty, DLF, Sobha, among others lost between 5-40 percent. Cigarette maker and Index heavyweight ITC slipped nearly 7 per cent after Maharashtra government banned the sale of loose cigarettes.
Shares of Nestle India crashed 12.5 percent after sale of its popular Maggi Noodles was banned at several locations across the country after preliminary tests showed high levels of lead. Meanwhile, Paul Bulcke, CEO, Nestle SA re-iterated in a press conference that Maggi noodles are safe for consumption and that Nestle does not add MSG.
On the gaining end, shares of Reliance Industries climbed over 3 percent after the company overtook Oil and Natural Gas Corp (ONGC) to become the nation’s most profitable company.
Shares of Coal India gained over 3 percent after production of the company in May rose by about 13 per cent.
Week ahead
On Monday, the RBI is scheduled to announce the current account deficit (CAD) data for March quarter 2015. The government will unveil the index of industrial production (IIP) data for April 2015 and the consumer price index (CPI) data for May 2015 on Friday, June 12. Markets will react to the firm US jobs data and outcome of the OPEC meet.
