Weekly: Markets in bear grip, fall 5% on global meltdown

Investors remained jittery on fears of global economic recession alongwith high inflation and rising interest rates, with markets posting 5% weekly decline

Major news for the week

Food inflation at 8.04% versus 7.33%

India’s GDP to grow by 8.2% in FY12: PMEAC

India’s factory output falls to a 20-month low in July

Exports rise 46.45% to $29.21 billion in June

Bharti Airtel Q1 consolidated net profit down nearly 28%



Indian indices

Investors had pressed the panic button this week on the back of fears of a possible US double-dip recession and escalating European sovereign-debt woes. Worries over a prolonged global economic slowdown sent Indian markets to a 14-month low this week.

Investors were nervous over the health of the global economy due to poor economic data that overshadowed a congressional deal to raise America’s debt ceiling to avoid a first-ever default. Global worries led to a massive sell-off across the world. Adding to the negative tone, the United States lost its top-tier ‘AAA’ credit rating from Standard & Poor's on Friday in an unprecedented blow to the world's largest economy in the wake of a political battle that took the country to the brink of default. Looking at all this, more pain is still left for the markets.

Also, macro economic factors like high inflation and interest rates have been hampering growth back home. Data showing heavy selling by foreign institutional investors ( FIIs) spooked the markets. It was the worst week that the Indian markets witnessed in 2011, touching its lowest level since June 2010.

The Sensex oscillated 1449 points between a weekly high of 18440 and a weekly low of 16991 to close 891 points or 4.9% lower at 17306. The Nifty swung 435 points between a weekly high of 5552 and a weekly low of 5116 to shut 271 points or 4.94% lower at 5211.

Global indices

The world stocks crashed on mounting fears over US and Europe debt crisis. On average basis, the US markets fell 7% and the European indices tanked 11% in this week. The biggest loser of the week was Germany's DAX 100, down by 12.89%, following that France's CAC 40 down by 10.73% and UK's FTSE 100 declined by 9.77%. Nasdaq and Dow Jones fell by 8.13% and 5.75% respectively. In the Asian region, Hang Seng down by 6.66%, Nikkei down by 5.42% and Shanghai Composite fell by 2.79%.

Sectoral and stock screening

All the sectoral indices ended the week in the negative territory. BSE Realty plunged 7.47% on interest rate hike concern, than comes BSE Metal down 6.81% as global economic slowdown may crimp demand and BSE Information Technology (IT) tumbled 6.45% on concerns that the US economic recovery is petering out. Rest of the sectors ended the week lower in the range of 1.78-5.91%.

Among ‘A’ group stocks, top three gainers of the week - Chambal Fertilisers shot up by 7.44%, Bharat Petroleum Corporation Ltd (BPCL) surged by 5.99% and Adani Enterprises gained by 5.45%. Top three losers of the week - Bharat Forge slid by 15.31%, BF Utilities fell by 14.85% and Reliance Capital lost by 14.02%.

FII/MF activity

The FIIs also participated in the sell-off, breaking its five-successive week of buying activity. The FIIs sold Indian equities worth a net of Rs1,492.3 crore this week as compared to the net buy of Rs1,248.4 crore seen in the previous week. The domestic institutional investors (DIIs) remained net sellers for the second consecutive week and sold Indian equities to the tune of Rs90.7 crore as compared to the net sell of Rs106.6 crore seen in the previous week.

Outlook

In the coming week, we may see stock specific action as the earnings season head towards its climax. Major companies, which will publish their quarterly earnings, include M&M, Tata Communications, Mahindra Satyam, GMR Infrastructure, Rural Electrification Corporation, Tata Motors, Reliance Infrastructure, Reliance Power, Castrol India, Tata Steel, Hindalco, Coal India, Jaiprakash Associates, Unitech, HPCL, State Bank of India, Aditya Birla Nuvo and Shipping Corporation of India.

The domestic markets may take cues from the index of industrial production (IIP) data for the month of June 2011 on Monday (August 08, 2011).

Coal India replaces Reliance Infrastructure in the 30-share BSE Sensex and Sun Pharmaceutical replaces Reliance Communications in Sensex with effect from Monday.

On the global front, all eyes will be on the US Federal Reserve's one-day policy meeting on Tuesday (August 09, 2011). FII activity and developments in the external environment may also have some impact on the Indian markets.