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Stocks this week
Benchmark share indices ended with marginal losses this week, as gains in rate-sensitive sectors on hopes of a lending 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 ending Friday, the 30-share Sensex (of the BSE) ended down 169 points or 0.6 per cent at 28,067 and the 50-share Nifty (of the National Stock Exchange) closed 46 points lower at 8,519.
"The macro surprise in consumer inflation has set the ground 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 rupee. Indian markets have been quite divergent in their performance from their emerging market peers over the past 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," said Tirthankar Patnaik, India Strategist at the Asia financial solutions division of Mizuho Bank.
The broader markets had gained last week and saw profit taking in this one. The BSE mid-cap index eased nearly one per cent, while the small-cap index ended 2.8 per cent lower.
The yuan's surprise devaluation spooked Asian markets and the ripple effect spread to global stocks. At home, the continued protests in Parliament by the opposition thwarted the government's effort to pass the goods and services tax constitutional amendment.
India's retail inflation fell to 3.78 per cent in July from 5.4 per cent the month before, even as the growth in factory output accelerated to 3.8 per cent from 2.7 per cent the previous month, official data showed.
Further, the wholesale price index fell at a faster pace to a negative 4.05 per cent in July, the ninth straight quarter of contraction.
Metals were the top losers as their export would get costlier with devaluation of the yuan by China, the world's largest consumer. Vedanta, Tata Steel, Hindalco and Coal India were among the top Sensex losers.
Meanwhile, export-led sectors such as information technology and pharmaceuticals gained, as a weakening rupee would boost revenue. Among IT majors, Tata Consultancy Services and Infosys were top gainers. In pharma, Lupin, Sun Pharma and Cipla gained the most among Sensex stocks.
In the rate-sensitives, the HDFC twins were top gainers in the financial segment. Maruti Suzuki, Hero MotoCorp and Bajaj Auto were gainers in the automobile space. Tata Motors ended down 9.5 per cent after earnings for the quarter ended June nearly halved because of weak sales by subsidiary JLR in China.
Oil and Natural Gas Corporation ended four per cent lower. It 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 nine per cent lower, after consolidated net profit for the June quarter slipped nearly seven per cent from the same period a year before, to Rs 3,764. Hindalco Industries slumped nearly 15 per cent, after a less than expected net profit of Rs 107 crore in the June quarter, down more than half from the corresponding period last year. This was mainly due to increased expenses and doubled finance costs, even as net sales rose over a year.
Week ahead
Investors would be interested in the government's plan for a two-day Parliament session to get the GST bill through, so that it meets the implementation timeline of April 2016. Weakness in the rupee could roil commodity stocks, while export-led sectors could extend gains.
On the global front, the US Federal Reserve will issue the minutes of its meeting on July 28-29 on Wednesday. This could signal its stance on key policy rates. Further, Thursday will be of significance, being the deadline for debt repayment by Greece.
