Weekly review: Markets in bear grip

Sensex sheds 3% in a holiday-shortened week on FII selling, RBI action and F&O pressure

The untamed inflation and associated policy action by the RBI, derivatives expiry on Thursday and fears surrounding a possible slowdown in corporate earnings conspired to give jitters to the market participants in a holiday-shortened week of trade. The BSE Sensex ended at 18,396, down 3.2% (612 points), and the Nifty shut shop at 5512, down 184 points, with the rate-sensitive’s' taking it on the chin.

The midcap index ended at 6898, lower by 294 points and smallcap index ended at 8546, down 400 points. In the process, the benchmark indices closed below their 200-DMA (18,730 on the Sensex and 5,624 on the Nifty), which is considered as an important long-term technical indicator.



The markets had begun the week on a promising note, with the Sensex leaving behind past volatility to gain nearly 150 points on Monday. But the hopes of a sustainable reversal proved to be short-lived. Food inflation remained sticky in mid-January on higher onion and fruit prices while fuel inflation eased. The food price index rose 15.57% and the fuel price index climbed 10.87% in the year to January 15, government data showed on Thursday. In the preceding week, annual food and fuel inflation stood at 15.52% and 11.53% respectively.

The RBI increased the repo rate to 6.5% from 6.25% and reverse repo rate to 5.5% from 5.25% in the monetary an attempt to stem the soaring inflation and more importantly, hinted at a further rate hike at its March meet, adding to the nervousness on Dalal Street. However, the central bank retained the cash reserve ratio (CRR) at 6% of net demand and time liabilities (NDTL) and the bank rate has been retained at 6%.

The rollovers of positions into the February series on the last day of the current month expiry only added to the ruffled feathers among the market participants; the Nifty futures saw rollovers of 66.71%, which were lower than last year's monthly average in excess of 70%. And the impending weekend only aggravated the pain on Friday.

The extent of gloom to have enveloped the Street can be gleaned from the fact that around 35 out of the 50 Nifty shares are now below their 200 DMA and one out of five actively traded stocks from the BSE-500 index have touched one-year lows. Besides Reliance Industries, as many as 96 stocks featuring in BSE-500 index hit 52-week lows, including the likes of Reliance Capital, Reliance Industrial Infrastructure, JSW Steel, DLF, Steel Authority of India, HDIL, MTNL, Bharat Earth Movers and Financial Technologies.



The BSE realty index was the largest loser among sectoral indices, plunging to 20-month lows of 2279, down 4.9% on Friday,

DLF down 11.6% was the major loser in the Sensex 20 stocks. It was followed by Mahindra & Mahindra, Hindustan Unilever, Reliance Communications down 8-10% each.

Reliance Industries plunged over 7% to Rs 915, despite 28.14% rise in net profit to Rs 5136 crore on 5.15% rise in net turnover to Rs 59789 crore in Q3 December 2010 over Q3 December 2009 in the wake of ongoing concerns surrounding a slowdown in gas production at the KG-D6 field.

Sterlite, Hero Honda, Cipla, Jindal Steel, Hindalco, Jaiprakash Associates, ICICI Bank, Bajaj Auto and Wipro were the other major losers.

On the other hand, ONGC surged nearly 3% to Rs 1,136 ahead of its results and news of Shale gas find in India. NTPC also moved up over 1%.

And Tata Steel was up 1% as its follow-on public offer (FPO) was well-received by the investor community. The issue, which closed on January 21, was subscribed by 6.03 times.

SBI also managed to end in greed on reporting better-than-estimated revenue growth for the third quarter ended December 31, 2010. The country's largest public sector bank posted a 14% jump in net profit of Rs 2,826 crore in Q3FY11 compared with Rs 2,479 crore in the corresponding period last year on the back of higher growth in core income.

In the realty space, HDIL crashed 12% to Rs 140. Unitech, D B Realty, Ackruti City, Sunteck Realty and Sobha Developer - down 6-11% each. Prasvnath Developers and Indiabulls Realestate were down over 5% each.

In the broader markets, IVRCL Infrastructure with a loss of over 15% at Rs 84 was the major laggard in the BSE 200 stocks. Lanco Infratech plunged 13% to Rs 47. JSW Steel, Bombay Dyeing, Power Finance, Bajaj Hindusthan, Indiabulls Fin, Oriental Bank of Commerce, Rural Elect, Apollo Tyres, Adani Enter, LIC Housing Finance, Pantaloon Retail, Tata Communication, Century Textile and Jai Corp were the other major losers. As many as 181 stocks ended lower out of the 200.



BPCL bucked the trend with a gain of nearly 7% at Rs 632. Ambuja Cements, Areva T&D, Aditya Birla Nuvo, Zee Entertainment, National Aluminum, Indian Oil Corp, Andhra Bank, Idea Cellular, Anant Raj Industries and KSK Energy Ventures were the other prominent gainers.