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Weekly wrap: Market turns defensive on Fed scare, BJP debacle

17:42

Indices ended the week with marginal gains despite initial concerns over a likely rate hike in the US. The ruling BJP’s poor performance in the bypolls further weighed down sentiment. However, the mood perked up after the Fed retained its earlier stance of keeping interest rates historically low for a “considerable time”, sparking a rally in equity markets globally.

Weekly wrap: Market turns defensive on Fed scare, BJP debacle

Fed Chair Janet Yellen made clear that any change in rates will be subject to changes in macro economic data in US and not based on a calendar projection. Investors were wary of a potential sell-off, especially in emerging markets, if the phrase “considerable time” were to be dropped from the statement.

“I think India remains a very strong story within the emerging markets. We do have other stories out there, we have turned more bullish on Brazil and on Mexico but within Asia, our key overweight is India then followed by smaller markets like Indonesia, Thailand, continue to like Taiwan but India looks to us in terms of the BRICS as the most compelling story,” said Adrian Mowat of JP Morgan.

NaMo wave gets rain check

The 33 Assembly and 3 Lok Sabha seats bypoll results came as a jolt for the ruling BJP party. Out of the 3 Lok Sabha seats, the saffron party managed just one and from amongst 33 assembly seats, it won 11 while rival Congress made a comeback with 7 seats.

In Uttar Pradesh, BJP won just 2 out of total 11 assembly seats that went to by-polls. The incumbent Samajwadi Party (SP) staged a comeback with 9 assembly seats.

But what should really get BJP thinking is it’s defeat in 3 constituencies in Prime Minister Modi’s home state of Gujarat to Congress. Out of the total 9 seats that went to by-polls, BJP won just 6 seats. It should be recalled that the party won all 26 Lok Sabha seats in Gujarat in LoK-Sabha elections that happened in May.

In Rajasthan, experts say, the defeat was humiliating. BJP managed just one seat, out of the total four. The Congress surprised by winning remaining 3 seats.

Market Internals

Both Sensex and Nifty came back to life on Wednesday after consolidating for six days in a row. For the week ended September 19, both the benchmark indices rallied 0.1-0.2 percent. Top blue-chip gainers such as Maruti, Axis Bank HCL Tech, Tech Mahindra, Zee Ent, Grasim and TCS swelled 1-2.7 percent this week. HUL, DLF, SBI, ONGC, JSPL and L&T slipped between 1.6-4.7 percent.

The mid-cap space gave investors a run for their money this week; CNX mid-cap corrected over 1.5 percent while small-cap eked 0.2 percent gains.

Fed scare seems to have pushed investors on the backfoot as market participants come to reality that capex cycle is yet to revive and valuations have outrun the fundamentals in cyclical and banking stocks. Demand for traditionally defensive themes such as pharmaceutical and information technology were in play this week even as capital goods and infrastructure took a back seat.

Amongst different sectors, demand for software stocks this week inflated the BSE IT index by 2 percent. Pharma index and auto gained 1-1.4 percent. CNX Capital goods, infra slipped 1.6-2 percent this week, metal index was down 3 percent.

R Venkataraman of IIFL said that the correction recently witnessed in the market is healthy as Indian equities are gaining a lot of interest globally.

“We are in a cyclical uptrend and it is very difficult to pin point the micro movements of the market saying that there is a correction of 300-400 points. So, we would say some more correction if I can use the word ‘more’ that might happen towards the month of October when we will see results season coming in because as of now there is optimism,” he said while speaking to CNBC-TV18.  

From China with Love

News reports of China potentially investing USD 100 billion in India also added to the sentiment. The figure was however revised to USD 20 billion (to be invested over a period of five years) that was promised during Chinese President Xi JingPing’s three-day visit to India.

Stock movers

Cipla touched its 52-week high levels this week. The drug major granted a license to US-based Salix Pharmaceuticals Inc giving exclusive rights for certain patent applications of its ‘Rifaximin Complexes’, currently under drug development stage. The stock surged 9 percent, closing at Rs 627.80 on the BSE. The 52-week high of the share was Rs 639.05 and the 52-week low was Rs 366.70.

Biocon stock surged over 3 percent to Rs 507.90 on the NSE, this week . Silver Leaf Oak (Mauritius) agreed to acquire a minority 10 percent stake in Syngene International, the subsidiary of Biocon’s Research Services. Silver Leaf will acquire the stake from Biocon Research (BRL), a wholly owned subsidiary of Biocon at a valuation of Rs 3800 crore, said the company in its filing to BSE, adding the transaction is subject to standard condition precedents including regulatory approvals.

Heavyweight Larsen & Toubro slipped almost 4 percent this week. The stock saw a bump on Thursday after the company’s it’s Oman subsidiary -L&T Oman LLC, won a order from the Ministry of Defense, Sultanate of Oman against stiff international competition for the construction of Adam airbase in Al Dakhiliya Governorate, said the company in its filing.

NCC stock surged around 10 percent as the stock adjusted for rights issue. The infrastructure company raised Rs 598.70 crore through this rights issue. It issued 29.93 lakh equity shares on rights basis at Rs 20 apiece (including premium of Rs 18 per share) and allotted shares in the ratio of seven shares on rights basis for every six shares held.

Tata group stocks were in focus after ratings agency Moody’s investor Service on Thursday upgraded ratings of half a dozen Tata Group firms, including  TCS and Tata Motors , on account of Tata Sons’ track record in providing timely support to these firms.

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