Weekly Review: Markets plunge 5%, metal shares slide

Markets slipped 5%, snapping four consecutive week of gains as worries of double dip recession in the west caused investors to flee from equities.

The Nifty commenced the week on a subdued note and managed to eke out modest gains in the beginning of the week. However, the Nifty wilted amid global rout mid-week after a warning from the US Federal Reserve that the economy faced severe downside risks. The index continued to remain under selling pressure through Friday and touched a low of 4,829 as concerns of Europe’s spiraling debt crisis weighed on investors mind. The Nifty finally closed at 4,868, down 56 points and the Sensex ended at 16,162, down 199 points, clocking the lowest close in a month. Both the indices were down around 4.5% for the week.

Rupee also depreciated 4.4% in the past week, posting its biggest weekly fall in 15 years. On Friday, the Rupee hit a new 28 month low of 49.90 as RBI refrained from intervening in the currency market. Analysts said that the steep fall in the Rupee was because institutional investors liquidated positions, on worries of a Greece default and recession in the developed economies.

The International Monetary Fund also cut the global growth forecast from 4.3% to 4% for 2011-12, sighting heightened risk of a recession in Europe and US. Elsewhere in Asia, growth in China also hit a rough patch after manufacturing activity shrank for the third consecutive month,  to a low of 49.34 in September, against 49.9 in August.

Indian markets however outperformed the global markets. For the week, Dow Jones Industrial Average and S&P 500 declined over 6% each. In Asia, the Hang Seng and Shanghai Composite declined 9% and 2% respectively.

Back in India, SMC Global in their weekly note said, “Markets may remain volatile due to global developments and derivatives expiry for the month of September.” Recent depreciation in the Rupee may weigh on inflation, “food items like pulses, butter and spices may have to be imported as domestic production falls short of demand,” added SMC Global.

On the technical charts markets are trading with a negative bias. "Nifty future is trading below 4880 level; selling pressure may remain intense at current levels. On the downside 4750-4720 levels looks possible and on the upside, 4950 remains the first resistance," said Ashish Chaturmohta, Vice President - Derivatives and Technical Analyst from IIFL Wealth.

Among the sectoral indices, BSE Metal and Oil & Gas were the top losers, down almost 6% each.

Metals shares lost sheen due to concerns of dampening demand from the developed nations. NMDC and Sterlite Industries declined 9% each, and Hindalco was down 8%.

From the oil & gas space, Essar Oil declined 8%, Petronet LNG fell 7% and Reliance Industries and ONGC declined over 6% each.

BSE Consumer Durables was the only index that ended in the green, up 0.5%. Bajaj Electricals was the top gainer, up 3%, followed by C Mahendra and VIP Industries, up 2.6% each.

Top losers on the Sensex were Larsen & Tourbo, down 10%, Tata Motors fell 9% and Hero Motor Corp declined 8%. Only three stocks on the Sensex managed to notch marginal gains – Tata Power and State Bank of India advanced 0.5%, and Cipla was up 0.3%.

From the broader markets BSE midcap and the smallcp indices fell over 2% each.

Top losers from the midcap space were IVRCL, down 15%, S Kumars fell 13% and Pantaloon Retail declined 12%.

Prominent losers from the smallcap index were AP Paper, RM Mohite and Claurus Financials, down over 22% each.