Markets witness yet another sell-off this week

Review of the Week ended 25th November 2011.

The markets have witnessed yet another sell-off this week as the rupee further depreciated to breach the Rs 52 dollar mark, touching new highs of Rs 52.78 per dollar. Moreover, concerns from the global front have also added to investor woes especially to FII’s who pulled out a total of Rs 5323 crore from the Indian markets this week. As on date their total investments in equities stand at around negative Rs 291.6 crore as against Rs 133266.3 crore last year.

On the global front the euro crisis have refused to abate as the yield on govt. bonds of countries like Spain, Italy France etc. have shot up massively indicating towards a further worsening of the situation there. In case of US, according to govt. data, the economy has grown at less than the estimated 2 per cent Q3 which threatens the risk of another recession there. Also there are some serious reports circulating that the failure of the super-committee to reach a compromise on a debt-reduction plan has exposed the U.S. sovereign rating to more downgrades. Overall, the mood before Christmas doesn’t look so merry.

Back home, the inflation internals for the week ended Nov 5th also didn’t do much to cheer up the markets. Though, it’s true that the numbers have clearly shown a cool-off in the inflation trend and has given hopes that the RBI might pause in its rate hike stance, but the markets didn’t seem too keen on discounting it on a positive note.

In other development, the cabinet decision to allow FDI investments of up to 51 per cent in multi-brand and 100 per cent in single-brand retails has come as a very positive news for the likes of Pantaloon, Trent, CESC, Bharti, etc who have show keen interest in bringing foreign investments into this growing sector.

Moving forward, the main focus of the govt. now happens to be on addressing to fiscal deficit issue and it is currently taking all efforts to stay with the limit. With already having reached 68 per cent of the deficit limit in the first half of the year, there is very little headroom for the govt. to incur any further unnecessary expenditure. Also on the receipt side the disinvestment plan has gone askew and the tax collection has also reduced as a result of slowdown, which has put further pressure.

Moving on the stock specific action, auto parts an equipment maker Amtek Auto, has been the best performer this week, up by 28 per cent as the company proposed a buy back offer, which led to spurt in the scrip’s price on the bourses. Pharma major Aurobindo Pharma has also witnessed a positive run this week as the dispute between the drug maker Pfizer and Aurobindo Pharma, over the block buster generic drug 'Lipitor' got settled.

Among the notable losers were, Mannapuram Finance, down 13 per cent and Adani Enterprise down 12 per cent. Other losers included, HDIL, Shree Renuka Sugars, Opto Circuits and Mundra Port etc.

Among the SENSEX, index heavyweight RIL declined 6.69 per cent over concerns from its falling output at its KG D6 gas block. Coal India rose by 3.52 per cent as it witnessed a renewed buying spree after being dumped heavily over the past few weeks. Interest rate sensitive auto stocks have also received a lot of beating on the bourses, as M&M was down 4.27 per cent, Hero was down by 6.18 per cent and Bajaj was down by 3.03 per cent.

Among the sectoral indices, the BSE sector indices have also shown a dismal performance this week. Metals have been the biggest loser this week followed by Consumer Durable and Oil & Gas. Healthcare Index has been the only positive sector this week as at such times investors look for safer bets. The BSE Small-cap has gone on to tumble further by 10 per cent as investors shun these index’s further.

In conclusion, looking at the way the markets have panned out this week and keeping in mind the global concerns we expect market to remain volatile for a while. The govt. is expected to announce Q2 GDP data next week and markets will keenly await this data as it will provide vital cues on RBI’s policy stance.

Finally, valuations for most stocks in the market look very attractive but we advice our readers to not just go buying at such cheap valuations, because the overall macro mood in the economy is very weak. The FII’s have also massively pulled out of the markets and hence it gives clear signs that the govt. and the system aren’t doing much to keep India on the growth path.