Sensex closes flat amid fears of Q1 earnings downgrade

The BSE Sensex and NSE Nifty closed flat for the fifth consecutive session on Friday amid fears of earnings downgrade. Even rate cut by European Central Bank (ECB) yesterday failed to drive global markets higher as investors seem more worried about sluggish economic growth.

The BSE benchmark fell 17.55 points to close at 17521.12 and the NSE benchmark declined 10.35 points to 5,316.95.

Jyotivardhan Jaipuria, Head of Research, BofA Merrill Lynch feels earnings won’t be very good for the Sensex companies. "Excluding a few aberrations, earnings growth will be under 10%," he says.

"We will probably see analysts cutting their earnings forecast by 2-3% for the Sensex companies. For the first time we will see sales growth slowing. Our forecast is for this quarter sales growth at 16% that will be the slowest in ten quarters."

Major companies like HDFC, HDFC Bank, Infosys and TCS will kick start the earnings season by announcing their first quarter earnings numbers for financial year 2012-13.

He believes the market will continue to grapple with the same macro issues in the second half of the year as well. "I think markets will keep battling and seesawing between the benefit of lower rates versus growth still not picking up," he told.

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Country's second largest software services exporter Infosys dropped 1.5% whereas its rival TCS gained 0.5%. Housing finance company HDFC rose 1.27% while HDFC Bank was flat.

Top lender State Bank of India declined 0.64% while its rival ICICI Bank jumped 1.55%. Engineering and construction major by sales Larsen & Toubro tanked 1.57%.

Reliance Industries, India's most valued stock fell 0.57% and top telecom operator Bharti Airtel slipped 0.76%.

Shares of Jindal Steel topped the selling list, losing over 3% as the company suspended work at Bolivia Iron Ore Mine. Sterlite Industries tumbled 2%.

FMCG majors ITC and HUL gained 1% each. Utility vehicle maker M&M and drug producer Cipla rose 1% too.

In the second line shares, GMR Infrastructure, NCC, GVK Power, Sintex Industries, Jet Airways, Kingfisher, Pantaloon Retail, JM Financial, Dhanlaxmi Bank and Delta Corp were down 2-4%. Texmo Pipes plunged 10%.

However, SKS Microfinance shot up 19%. Jain Irrigation, WWIL, Anant Raj Industries, IFCI and Dish TV were up 2-7%.

For the week, the BSE Sensex rose 0.5% and NSE Nifty gained 0.7%.

Rate cut by ECB failed to cheer markets and even commodities because the market seems worried about growth in major parts of the world after disappointing manufacturing data. France's CAC, Germany's DAX and Britain's FTSE were down 0.10-0.5% while the Dow Jones futures dropped 20 points.

Among Asian markets, Shanghai rallied more than 1% in late trade as The People's Bank of China cut lending rates by 31 basis points with 30% flexibility below reference rate and also cut 1-year deposit rate by 25 bps that will give a boost to slowing economic growth.

European Central Bank cut refinancing rate by 25 basis points to a record low of 0.75% yesterday, as expected. Deposit and marginal lending rates were also cut by 25 bps. However, ECB President Mario Draghi commentary was bearish on growth. He has noted that the downturn has become more widespread and demand remains weak.

Currencies depreciated too against the US dollar since yesterday. The Indian rupee fell by 54 paise or 1% to 55.48 to the dollar and Euro declined 0.11% to 1.2369 against the US dollar.

Brent crude declined 1.5% to USD 99.21 a barrel and NYMEX crude fell 1.8% to USD 85.65 a barrel.