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Benchmark share indices ended with marginal losses during the week as gain in rate sensitive sectors on hopes of a rate cut amid encouraging macro economic data helped offset most of the losses after a surprising devaluation of the yuan dragged the rupee to two-year lows while stocks also lost ground.
In the week ended August 14, 2015, the 30-share Sensex ended down 169 points or 0.6% to end at 28,067 and the 50-share Nifty closed 46 points lower at 8,519.
"The macro surprise in consumer inflation has set grounds for an accelerated rate cut trajectory, while gradual improvement in industrial production is likely to continue. India's external risks are on the rise, as a rising dollar and weaker Chinese yuan, put pressure on the hitherto top-performing, INR. Indian markets have been quite divergent in their performance from their EM peers over the last two months, and now stand to face higher risk on a volatile global macro environment. Hence while we remain positive on India in the medium to long-term, we do not rule near--term global macro headwinds," Tirthankar Patnaik, India Strategist Asia Financial Solutions Division, Mizuho Bank Limited.
Meanwhile, the broader markets which had gained last week witnessed profit taking during the week under review. The BSE Mid-cap index eased nearly 1% while the Small-cap index ended 2.8% lower.
The surprise devaluation of the yuan by China spooked Asian markets and the ripple effect spread to global stocks too.
On the domestic front, the continued protests in the parliament by the opposition during the last week of the monsoon session thwarted the government's effort to pass the Goods and Service Tax Constitutional Amendment Bill.
India's retail inflation fell to 3.78% in July from 5.40% in the month before, even as the growth in factory output accelerated to 3.8% in June from 2.7% in the previous month, official data showed.
Further, wholesale price index (WPI) fell at a faster pace to a negative 4.05% in July, the ninth straight quarter of contraction.
Metals were the top losers as export would get costlier on the back of devaluation of the yuan by China, the worlds's largest consumer. Vedanta, Tata Steel, Hindalco and Coal India were among the top Sensex losers.
Meanwhile, export-led sectors such as IT and Pharma gained as the weakening rupee would boost revenues going forward. Among IT major TCS and Infosys were the top gainers while in the pharma space Lupin, Sun Pharma and Cipla gained the most among Sensex stocks.
In the rate sensitive HDFC twins were the top gainers in the financial segment while Maruti Suzuki, Hero MotoCorp and Bajaj Auto were the gainers in the auto space.
Tata Motors ended down 9.5% after earnings for the first quarter ended June 30, 2015 nearly halved because of weak sales in by its subsidiary JLR in China.
ONGC ended down over 4%. The oil major posted a 14 per cent rise in net profit to Rs 5,459 crore for the quarter ended June from a year before, on improved realisations and lower sharing of subsidy burden.
Coal India ended down over 9% after consolidated net profit for the June 2015 quarter slipped nearly 7% to Rs 3,764 crore compared to same quarter last fiscal.
Hindalco Industries slumped nearly 15% after it reported a lower-than-expected net profit at Rs 107 crore in the June quarter, down more than half of the bottomline recorded in the corresponding period last year mainly because of increased expenses and doubled finance costs even as net sales rose on a year-on-year basis.
WEEK AHEAD
Investors are likely to focus as the government is planning a two-day Parliament session in an effort to get GST Bill so that it meets the implementation timeline of April 2016.
Further, the weakness in the rupee could roil commodity stocks while export-led sectors may extend gains.
On the global front the US Fed will release the minutes of its meeting held on July 28-19 on Wednesday August 19 which could signal its stance on key policy rates.
Further, Thursday August 20 will be of significance being the deadline of debt repayment by Greece.
