Weekly Review: Markets end lower as rate sensitives weigh

Auto, Realty, Bankex, Cap Goods indices among top losers

Benchmark share indices ended marginally lower during the week ended July 20 weighed down by rate sensitive shares after June inflation which remained above the central bank's comfort zone dashed hopes of cut in key policy rates.

The 30-share Sensex slipped 55 points or 0.3% to end at 17,158. The 50-share S&P CNX Nifty declined 22 points or 0.4% to close at 5205.

India's headline inflation slowed to its lowest level in five months in June, helped by slower increases in fuel prices, adding to pressure on the RBI from business leaders to cut interest rates to help revive the lacklustre economy. The wholesale price index grew 7.25% in June, lower than the 7.62% rise estimated by analysts.

However, India's headline as well as consumer price inflation is way above the Reserve Bank of India's comfort level, the central bank Governor Duvvuri Subbarao said on July 16. The RBI's threshold level for inflation is around 5%, he said.

Last month, exports dipped over 5% while imports shrunk over 15%, bringing down trade deficit to a 15-month low.
Director-General of Foreign Trade (DGFT) Anup Pujari said the trade deficit stood at $185 billion last year.
"The government has taken steps to reduce the trade deficit this year. We are encouraging exports of manufacturing sector and impose anti-dumping duties to safe guard domestic manufacturing sectors," Pujari said.

Further, The Securities and Exchange Board of India (Sebi) on Friday said qualified foreign investors (QFIs) would be allowed to invest in debt mutual funds that hold at least 25 per cent of their assets, either debt or equity, in the infrastructure sector.

Among the sectoral indices on the BSE, rate sensitive sectors such as Realty, Auto, Power, Bankex and Capital Goods were the top losers.

Realty Index ended down 2.5%. DLF, Unitech, Indiabulls Realty, DB Realty ended down 2-5% each on concerns of high inventory levels as home buyers delayed purchases because of high interest on home loans.

Auto Index ended down 1.6%. Auto shares were down mainly on fears that hike in diesel prices would impact sales. Maruti ended down 3.3% after violence erupted at its Manesar plant forcing stoppage of work.Hero Honda ended marginally lower after the company said rural sales could slow down if monsoon remains weak. Mahindra & Mahindra ended down 2.3%. However, Bajaj Auto ended up 6.2% and was the top Sensex gainer after the company said along with its distributor, it has undertaken pro-active measures like rationalising the end-user cost of vehicles in Sri Lanka and expects in sales to return by end of Q2 FY13. The auto major reported marginal 1% year-on-year (y-o-y) rise in net profit at Rs 718 crore for the quarter ended June 30, 2012. Net sales grew 4% at Rs 4,714 crore on y-o-y basis.

Power Index ended down 1.6% on profit taking. NTPC, Reliance Power, Adani Power, Torrent Power, Lanco Infra and Adani Power lost between 2-9% each.

Bankex ended down 1%. SBI ended down 2% after the bank hiked interest rate on NRE Rupee Term Deposits for tenor of 3 years to less than 5 years from 8.75% to 9% on deposits of less than Rs 15 lakhs with effect from 17 July 2012.
Kotak Mahindra Bank ended down 6.5% after reporting a fall in net interest margins (NIMs) at 4.7% in the quarter ended June 30, 2012, as against 5% as on June 30, 2011. The private sector bank has reported a 12% year-on-year growth, a slowest in past three years, at Rs 282 crore for Q1FY13 due to higher provisioning towards advances and receivables. HDFC Bank ended marginally lower while Union Bank ended down 9%.

Capital Goods Index ended down 1% with majors BHEL and L&T both losing 1% each after the initial euphoria of the imposition of 21% duty on power equipment proposed by the government faded away. Other prominent loser in the index include, Praj Industries, Suzlon Energy and Punj LLoyd.

Reliance Industries ended up 0.5%. The Mukesh Ambani-led conglomerate on Friday reported a 21 per cent year-on-year decline in net profit for the June quarter at Rs 4,473 crore on the back of falling gas output from its field in the Krishna Godavari basin. This is the third quarter in a row the company is posting a lower net profit. RIL had reported a net profit of Rs 5,661 crore in the April-June quarter last year. However, a better gross refining margin (GRM) and a sharp rise in other income helped RIL post a better profit than the March quarter’s Rs 4,236 crore.

Dr Reddy's Labs ended down 2.1% on reporting a slightly lower-than-expected 28% year-on-year (y-o-y) growth in consolidated net profit at Rs 336 crore for the quarter ended June 2012. Net sales grew 28% at Rs 2,541 crore on y-o-y basis.

Among the small-cap shares, 3i Infotech continues to surge on after the company recently allotted 225.9 million shares to lenders under its corporate debt restructuring (CDR) package at Rs 19.74 per share.

Markets are likely to remain volatile in the week ahead volatile week as the earnings season continues and aheady of expiry of derivatives on Thursday.

FMCG majors ITC , Hindustan Unilever , Colgate Palmolive (India) and Dabur India will announce April-June results. In the IT space focus will be on Wipro and HCL Technologies while in the capital goods segment Larsen & Toubro declares earnings on Tuesday, while Bharat Heavy Electricals announces on Thursday.