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Weekly wrap: Weak global cues pull Sensex, Nifty 1% lower

18:00

Both Sensex and Nifty corrected almost 1 percent in the truncated week ended October 10, in line with the weak trend in global markets.

Global equity investors have turned cautious over the past few sessions as fresh concerns over global economic growth have emerged, with the IMF trimming its forecast for 2015 to 3.8 percent. There was some relief on Wednesday/Thursday as equity markets cheered the Fed’s dovish view on interest rates in the US. However, the rally turned out to be a short lived one, as risks from geopolitical tensions and inflated asset prices continued to weigh on sentiment. Softening economy of Europe and a slowdown a continued China’s growth was also a concern.  

Key equity benchmarks declined in three out of the four sessions this week, with second line shares too underperforming. The CNX Midcap Index dropped 1.4 percent while BSE small-cap index was down 0.3 percent. Top weekly Nifty losers were NMDC, JSPL, Sesa Sterlite, Tech Mahindra, UltraTech Cement, Dr Reddy’s and Cairn India which corrected between 6-9 per cent.

Infosys shares rallied on Friday, and lifted sentiment for the IT sector in general after the company’s second quarter earnings topped analyst estimates. The icing on the cake was the 1:1 bonus share issue. The share hit a new high of Rs 3908 before closing at Rs 3888, up 7 percent over its previous close.

Foreigners continued to sell in the cash segment which could be a big dampener, warn experts.  

“We have been very worried about the fact that almost for three weeks we have been seeing this continuous sell number. If you add up the data, we are almost looking at 1 billion plus of selling over the last maybe two to three weeks of selling that we have been seeing,” said Tushar Mahajan, Head of listed Futures & Options – India, Nomura. He added FIIs have been cutting long positions on index futures as well, which is a worrying sign.

The erstwhile fence sitters -domestic institutional investors (DIIs) bought shares worth Rs 4670 crores in the same period, betting on prospects of an improving economy.  This has been largely driven by strong net inflows into equity mutual funds. During the September quarter, mutual funds logged inflows of close to Rs 24,000 crore

Crude prices continued to soften, with Brent Crude dipping below USD 90 on Friday. Lower crude oil prices benefit oil importing countries like India as it eases the pressure on currency, besides helping lower the government’s fuel subsidy bill. Stocks of Oil marketing companies such as IOC, BPCL and HPCL were in demand thanks to falling crude prices.

Among sectors, banking stocks were in demand this week. BSE Power, Oil & Gas, Realty gained 1.4% and Capital Goods indices gained between 1.3-2 percent while BSE IT, consumer durables, auto, FMCG, metals and pharma slipped 1.9-4.2 percent.

Among mid-caps, NDTV, Taneja Aero, GMR Infra, Shalimar Paint, NCC, Jet Airways, TD Power, Apollo Tyres, VIP Ind, JP Assoc and Escorts surged 9-53% higher. 

BSE healthcare index slipped 4.2 percent in the week owing to a sell-off on Wednesday. Investors hit the sell button on pharma counters spooked by reports that US Congress has begun investigation into price hikes of 10 select generic drugs.

Sun Pharma, Dr. Reddy’s and Cadila Healthcare were the major causalities of this, plunging between 1-6 percent in the week.

What lies ahead?

Investors will now eye IIP figures to be released after market hours on Friday. Experts suggest watching Maharastra elections closely. A defeat to BJP can trigger 2-3% sell-off in the benchmarks, warned market expert Mehraboon Irani of Nirmal Bang.

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