Sensex dips 1.3% for the week; eyes on RBI, state elections

Moneycontrol Bureau

The sell-off continued for the second consecutive week as the market consolidated the gains of the last month. Fed vice-chair Janet Yellen's soothing comments on quantitaive easing (QE) and RBI's comments on the rupee, halted the slide on Friday, even as investors are undecided on the near term trend.

After the better-than-expected September quarter earnings, the focus has now shifted to the RBI monetary policy (December 18), state assembly elections in December and developments on Fed's tapering.

"Above three events will really determine what happens to the market over the next one and a half months," Vibhav Kapoor, IL&FS said.

According to him, the upside for the Nifty is still capped at 6300. "We will definitely need weak US data, strong one way election result and RBI not to increase rates in December. If all of these three factors happen then there could be a possibility that the upside might shift from 6300 to 6400-6500," Kapoor said in an interview to CNBC-TV18.

"However, if we see more strong data from the US in the next few weeks then that will put pressure on the market," he said.

November inflation will also be keenly watched as that will be key to RBI's decision on interest rates. Wholesale inflation for October climbed to an 8-month high and both consumer and wholesale inflation are showing no signs of cooling.

RBI governor Raghuram Rajan, in a press conference on Wednesday, said the central bank on November 18 would undertake open market operations for Rs 8,000 crore to alleviate tightness in the system.

The Sensex fell 266.73 points or 1.29 percent to close the week at 20,399.42 and the Nifty lost 84.60 points or 1.38 percent to 6,056.15, weighed down by weakness in every sector except auto.

The broader markets, too, were under pressure with the BSE Midcap and Smallcap falling one percent each.

BSE Capital Goods Index saw the maximum cut of 2.7 percent among sectoral indices, followed by Oil & Gas with 2.5 percent.

Biggest losers among largecaps for the week were Asian Paints, GAIL, Tata Power, DLF, Sesa Sterlite, Jaiprakash Associates, ACC and IndusInd Bank, which crashed between 4-8 percent.

Coal India plunged 6 percent as its consolidated net profit fell marginally to Rs 3,052.36 crore for the July-September quarter from Rs 3,078.08 crore in a year ago period, impacted by higher expenses.

State Bank of India reported a 35 percent decline in second quarter net profit, but the asset quality was not as bad as feared by analysts. The stock was down just 1.25 percent for the week.

However, Tata Steel was the top gainer with a 5.5 percent upmove after better-than-expected second quarter earnings. M&M, too, beat forecast with a 10 percent jump in bottomline and the stock was up 5.3 percent.

“The main feature of the earnings season gone by has been that the larger companies seem to be better equipped to handle the slowdown as compared to the smaller companies, Nandkumar Surti, MD & CEO, JP Morgan said.

According to him, “The fact that growth numbers are just about turning around there could be some marginal upward ticking in the earnings for the next couple of quarters.”

In the broader space, Trident, Hind Dorr-Oliver, Alembic, Infotech Enterprises, Adani Enterprises, Aurobindo Pharma and India Cements rallied 8-14 percent while Maharashtra Seamless, Ashok Leyland, Tata Global, OnMobile Global, Shree Renuka Sugars, Karur Vysya Bank and Just Dial fell 7-12 percent.

Meanwhile, the rupee, which fell as much as to 63.90 during the week, closed at 63.11 against the US dollar, down 64 paise from previous week's close.

Inflow of foreign money continued to support the market as foreign institutional investors have consistently been buying Indian shares since October 3. For the week, they bought nearly Rs 2,000 crore worth of shares.