Bears play havoc; Indices register 4% weekly loss

Markets suffered a long-term damage this week with key indices breaking crucial support levels. High inflation, Infosys' disappointing Q3 nos and fears of rate hike weighed

Major headlines for the week

November IIP at 2.7%

Inflation rises to 8.43% in December

Infosys Q3 results lag estimates; stock falls

HDFC Q3 net profit jumps 33%

Duty-free sugar imports extended till March 31

Indian Indices

Indian markets have come under a bear grip in the new year. Bears have descended at the ring and remained aggressive since the start of 2011. Domestic indices were in a huge pressure for the second straight week amid high volatility. The domestic market fell sharply during the week owing to weak Q3 results by Infosys technologies and also concerns over rising inflation. Inflation surged to 8.43% in December as compared to 7.48% seen in previous month. The rising inflation increased fears of interest rate hike by Reserve Bank of India (RBI ) in its upcoming Policy meet schedule on January 25, 2010. Rate hike fears, as a result, led to heavy sell-off in interest rate sensitive sectors such as banking, auto and realty stocks. Another reason that led to steep fall in the market was Index for Industrial Production (IIP) data, which came in at a 18 month low level of 2.7% in November.

During the week, Sensex and Nifty breached another significant levels of 19000 and 5700 respectively. Markets witnessed highly volatile session throughout the week, with the Sensex and Nifty swinging 908 and 268 points respectively. Finally, the Sensex ended the week lower by 831 points or 4.22% at 18860 and the Nifty by 250 points or 4.23% at 5655.

Global indices

Among the global markets, US and European indices outperformed the Asian peers. During the week France’s CAC 40 index surged the most with gains of 2.83% while, DAX 100 and Nasdaq advanced over 1% each. On other hand, Sensex slid the most with a loss of 4.22%, followed by China’s Shanghai Index that fell 1.70%.

Sectoral and stock screening

In the second straight week of 2011, all the Sectoral indices ended the week in negative territory. BSE Capital Goods (CG), BSE Realty, BSE Bankex and BSE Oil & Gas tumbled over 5% each while rest of the sectors ended the week lower in the range of 1.55-4.09%.

Among ‘A’ group stocks, top three gainers of the week were Petronet LNG, which shot up by 3.4%, Grasim surged 3.29% and Ultratech Cement gained 3.04%. Top three losers of the week were pantaloon Retail which slid 13.05%, Zee Entertainment fell 12.85% and Jet Airways lost 12.3%.

FII/MF activity

The foreign institutional investors (FIIs) also participated in the sell-off and sold Indian equities worth a net of Rs3,387 crore in the week as compared to the net buy of Rs1,517.3 crore seen in the previous week. Selling by FIIs also dampened investor sentiment. The domestic institutional investors (DIIs) turned out to be the net buyers and bought Rs842.6 crore worth of Indian equities as compared to the net sell of Rs943.4 crore seen in the previous week.

Outlook

The earning of top Indian firm in next week may dictate the future path of Indian markets. Earnings of Larsen & Toubro, Axis Bank, Tata Consultancy services, Gail India, Bajaj Auto, HCL Technologies, Reliance Industries, ITC, Bharat Heavy Electricals and Punjab National Bank are scheduled next week. FIIs’ activity and developments in the external environment may also have some impact on the Indian markets.