The markets retraced all the gains of the preceding week due to renewed concerns on the geopolitical front and the resultant spike in crude oil prices. The Sensex oscillated in a broad range of around 1000 points between a high of 18,457 and a low of 17,469 before ending at 17,700, weaker by 510 points or 2.8% and the Nifty ended at 5303, down 155 points. There was underperformanmce on the broader market front; the midcap index ended at 6353, lower by 308 points and the smallcap index ended at 7789, down 339 points. Last week, the benchmark indices had clocked their first weekly gain after three consecutive weeks of losses on budgetary expectations and decline in inflation.
It was an eventful week, both globally and domestically. On the global front, oil raced to a 2-1/2-year high of $111 on fears that a deepening crisis in oil-rich Libya could lead to a disruption in supplies. There have been bloody clashes between pro- and anti-Gaddafi factions across the country as protestors seek to overthrow the despotic regime in a repeat of the events in neighbouring Egypt and Tunisia. And apprehensions that the contagion could spread to the tightly controlled saudi Arabia and China only accentuated the nervousness.
Meanwhile, the finance minister Pranab Mukherjee said the markets need not worry over global oil price uncertainty and indicated that Monday's Budget may ease taxes and rationalise subsidies to cushion the impact of surging global oil prices.
Among the major events during the week, the Economic Survey for financial year ending March 2011 unveiled on Friday forecast a strong economic growth of 8.75%-9.25% for the year ending March 2012. The GDP is expected to grow at a rapid pace in the next two years and agriculture is set to rise at 5.4% in FY11. The fiscal deficit for 2010-11, the Survey says, will be 4.8% of the gross domestic product or GDP, much lower than Mukherjee' Budget estimate of 5.5%. The Economic Survey also spoke about introducing the Direct Tax Code (DTC) in April 2012.
However, the railway budget was populist at best. Mamata Banerjee ignored the mounting deficit of the railay behemoth and instead, chose to pander to electoral considerations with an eye on the upcoming assembly elections in West Bengal. The populist measures announced by the minister included the introduction of 56 new trains in FY-12 and a target of adding 700 km of rail line annually compared to the current 150 km.
And food inflation accelerated slightly in mid February on rising prices of milk and fruits, amid expectations the government may announce fresh measures to rein in inflation in the budget.The fuel price index climbed 12.14% in the year to February 12, higher than 11.92%, government data showed. Wholesale food prices jumped 15.7% in January compared with 13.6% in December, fuelling fears that food inflation is leading to sustained price rises in other sectors of the $1.3 trillion economy. The primary articles index was up 15.77% from a rise of 14.59% a week earlier.
The Union Budget to be presented by the finance minister Pranab Mukherjee on Monday is a key near-term trigger for the markets. He is expected to stress on fiscal consolidation, infrastructure spending, Direct Taxes Code (DTC) and the Goods and Services Tax (GST). And going by the interaction of the PM with news editors last week, some reform measures may not be far behind. Though if the Railway budget is any indication of things to come, the government may be tempted to resort to big-ticket social sector initiatives and put radical reform meassures on the backburner in an attempt to soothe the aam admi who is already reeling under the burden of spiralling prices and disgruntled by the unending mega scandals tumbling from the government's closet.
All the benchmark indices ended in he red, with the exception of the oil and gas sector. The capital goods index slid 6.1% at 12325, auto index slipped by 5.3% at 8251 and banking index lost 4.7% at 11832.
Among individual pivotals, M&M slumped by 8.6% at Rs 595 to top the losers list on the BSE. DLF shed 8.5% at Rs 212 and Tata Motors lost 8% at Rs 1105. L&T, Tata Power and Jaiprakash Associates were the other significant losers on the BSE.
On the other hand, Reliance Infra gained by 5.3% at Rs 638 and Hero Honda added 2.5% at Rs 1500. And RIL jumped by 3% at Rs 965 after Europe's BP agreed to pay $7.2 billion for a 30% stake in India's largest behemoth's oil and gas blocks, including the gigantic eastern offshore KG-D6 fields.
In the midcap space, Aurobindo Pharma weakened by 26% at Rs 165, Money Matters shed 18% at Rs 96 and Patel Engineering lost 16% at Rs 154. Spicejet, Jet Airways and Prakash Industries were the other significant losers. Among the major losers in the smallcap space, Titagarh Wagons slid by 20% at Rs 331, Splash Media lost 18% at Rs 68 and Midfield Industries lost 16% at Rs 48.
Punj Lloyd weakened by 13.2% at Rs 61 to emerge as the top loser in the capital goods space. BGR Energy lost 12.3% at Rs 446, Alstom Projects lost 8.7% at Rs 514 and L&T lost 7.7% at Rs 1513. In the auto space, M&M weakened by 8.6% at Rs 595, Tata Motors slid by 8% at Rs 1105 and Ashok Leyland lost 7.9% at Rs 46. And in the banking space, Federal Bank tanked by 10.2% at Rs 335, Yes Bank lost 9.9% at Rs 255 and Union Bank lost 6.9% at Rs 315. Among the banking pivotals, SBI weakened by 6.2% at Rs 2583, HDFC Bank lost 5.8% at Rs 2046 and ICICI Bank lost 3.7% at Rs 987.
