Weekly wrap: Sensex snaps 4-week gains post record high; metals, IT drag

Consistent fall in inflation during first two months of 2014 and an expansion in industrial output in January for the first time in four months supported the market. But concerns over fresh tensions in Crimea and a slowing Chinese economy limited upsides.

It was a consolidation week for the market after record highs and that may continue for some more time, experts feel. But most of them think the pre-election rally is not over yet and advise buying on every dip ahead of general elections.

KR Bharat, MD, Advent Advisors said the upward momentum was unlikely to fizzle out anytime soon, and the market could ignore economic realities in India and overseas and also the geopolitical realities, for a while.

According to him, the market has also discounted a stable government and is now in the process of discounting some of the likely policy initiatives as well.

In economic data, February CPI inflation slipped to 25-month low at 8.1 percent (from 8.79 percent in January), which is close to RBI’s comfort level of 8 percent. It has raised hopes that the RBI may not hike policy rates at its next meeting on April 1. WPI inflation softened to a nine-month low at 4.68 percent in February as against 5.05 percent in previous month supported by fall in vegetable prices.

January industrial output grew 0.1 percent compared to contraction of 0.2 percent in earlier month but consumer goods, capital goods and manufacturing remained in the negative domain.

BSE Healthcare, Metal and IT indices were hit hard, falling 1.7 percent, 4.82 percent and 6 percent, respectively.

However, the Capital Goods index gained the most, rising 3.5 percent followed by Bank, Realty, Oil & Gas and FMCG with 1-2 percent.

Infosys was the biggest loser, shedding 9 percent after chairman Narayana Murthy sounded caution on the company’s growth. The management in Barclays investor conference said that revenue growth for FY14 was likely to be at the lower end of its guidance (11.5-12 percent). Brokerage house Deutsche Bank cut target price on the stock to Rs 3,600 from Rs 3,800. This had a ripple effect on other IT majors like TCS and HCL Technologies, which fell 4-5 percent.

Metal shares weakened on poor Chinese trade data. Copper prices hit the lowest since July 2010 while iron ore prices touched more than 1.5-year lows during the week, which caused Sesa Sterlite, Hindalco Industries and Tata Steel to lose around 8 percent.

Ranbaxy Labs fell over 7 percent as Supreme Court on Friday issued notice to company on following a PIL that the company was selling adulterated cholesterol lowering drugs in the country. The company, which is already facing manufacturing quality concerns, has recalled more than 64,000 bottles of cholesterol lowering drug in the US.

Sun Pharma was the latest company in import alert list. It received import alert on its Karkhadi unit in Gujarat. The stock fell 5 percent though the company said the contribution of this unit to company’s revenue is negligible. In another blow, the drug maker recalled one batch of subsidiary’s Glumetza generic, according to sources.

Commercial vehicle maker Tata Motors slipped 4 percent on consistent worries over its domestic automotive business but Jaguar Land Rover continued to help its global business, with sales growing 14 percent in February.

Axis Bank declined over 3.5 percent. Divestment secretary on Friday said the government would raise Rs 3,000-4,000 crore via SUUTI stake sale in Axis Bank by March-end, reports CNBC-TV18 quoting Reuters.

However, engineering and construction major Larsen & Toubro climbed nearly 5 percent as the company received an order worth Rs 3,655 crore for mega-road project in Qatar.

Oil marketing company BPCL rallied over 6 percent on source-based reports that the government will reimburse under-recoveries next week.

Tata Power gained 5 percent after the Appellate Tribunal of Electricity (ATE) asked the Delhi Electricity Regulatory Commission (DERC) and private power distribution companies in the city to lay out a roadmap for liquidation of “regulatory assets” worth up to Rs 8,000 crore.

Among others, IDFC, Kotak Mahindra Bank, Hero Motocorp, IndusInd Bank and Mahindra & Mahindra were up 4-8 percent.

The rally in banks was also after brokerage house Morgan Stanley upgraded financials to attractive from in-line with the raising ICICI Bank's target price to Rs 1,500 apiece from Rs 1,225 and HDFC Bank's target to Rs 1,000 from Rs 875.

In the corporate developments, sources said the government raised Rs 5,340 crore through stake sale in IOC today. ONGC and Oil India bought 5 percent stake each in IOC.

L&T Finance Holdings’ offer for sale issue fully subscribed, but was priced at a steep discount to market price. The company was also included in NSE F&O segment from Thursday.

Top car maker Maruti Suzuki has sent a clarification to market regulator Securities and Exchange Board of India (SEBI) over the recent decision to have its parent Suzuki Motor Corporation set up a manufacturing plant in Gujarat, reports CNBC-TV18 quoting sources.

Among midcaps, HCL Infosystems, Coromandel Engineering, Adhunik Metaliks, Dalmia Bharat, Gati, Ceat, Engineers India, BEML and JK Tyre surged 12-36 percent.

For the week ahead, investors will closely watch Sunday’s referendum in Crimea and FOMC meeting on March 18-19.