Markets declined 1% this week due to selling in banking shares after Moody’s downgraded State Bank of India and investors turning jittery ahead of second quarter earnings season.
The Nifty commenced the weak on a subdued note and succumbed to selling pressure mid-week after Moody’s Investor Service downgraded standalone rating of State Bank of India from C- to D+. Heavy battering in the banking stocks dragged the Nifty to a low of 4,728. The index recovered after the holiday on Thursday and played catch up on Friday, rallying almost 3% on back of short covering and rally in beaten down banking shares. The Nifty touched a high of 4,923 and ended at 4,888, up 132 points and the Sensex closed at 16,233, up 440 points on Friday. However, both the indices were down, over 1% for the week.
Globally, markets recovered after the European Central Bank said that it would increase purchases of bonds worth 53.7 billion and give yearly loans to support banks which are financially weak. Bank of England increased its bond purchase program by more than 33%, to $424 billion.
In Asia, Japan’s Nikkei Stock Average climbed 1%, Hong Kong’s Hang Seng gained over 3% and South Korea’s Kospi Composite jumped almost 3% on Friday. China’s Shanghai Composite was shut on account of Holiday.
Back in India, signs of growth slowing down were clearly seen. The HSBC Markit India Manufacturing Purchase Managers Index dropped to 49.8 in September from 53.8 in August tracking deterioration in growth globally.
Going forward markets will take cues from the industrial production data for August and results season which will kick start with Infosys numbers on October 12th. Analysts expect top line growth to remain intact but margin pressure may dent profitability. Angel Broking in a research note said, “Sensex companies will maintain healthy top-line growth momentum with 21.1% y-o-y sales growth, however profit growth is seen at 8.2% due to margin compression.” Net profit margin may decline by 138 bps, to 11.7% compared to last year added Angel Broking.
Technical analysts expect Nifty to see resistance around 4,950 levels. Ashish Chaturmohta from IIFL Wealth said, “Nifty future will see immediate resistance around 4,950 levels and on the downside immediate support is seen at 4,840 levels.”
Among the sectoral indices, BSE Bankex was the worst hit, down 5%. Downgrade of State Bank of India by Moody’s, citing concerns of high nonperforming assets and uncertainty over infusion of capital by the government had a ripple effect on other banking stocks. State Bank of India plunged 8%, ICICI Bank tumbled 6% and HDFC Bank was down 4%.
BSE Realty index was next worst hit, down almost 2%. Anant Raj Industries was the top loser, down over 6%, Peninsula Land and Prestige Estate plunged over 5% each.
BSE Capital Goods was the only index which ended in the green, up 0.7%; Larsen & Tourbo gained 3%, BEML added 2% and Pipavav Defence gained 1%.
Major losers on the Sensex were Jindal Steel, down 5%, Hindalco declined over 4% and HDFC Bank was off 4%. Prominent gainers on the Sensex were Maruti Suzuki, up 3%, Tata Motors advanced 2% and Sun Pharma added 2%.
Among individual stocks Bharti Airtel lost over 6% and Idea Cellular dipped 9% on concerns of penalty for violation of licensing rules regarding charging customers while roaming.
From the broader market, the midcap and the smallcap indices slipped almost 3% and 2% each.
