Bulls Take A Rest

The Indian markets have been very volatile in this week, in line with the global markets. The BSE Sensex dipped by 2.87%, while the Nifty index lost 3.3%, reflecting weakness in the Indian markets. The macroeconomic events worldwide lead to the global equity markets also moving down.

Selling pressure also remained on the currency front, as the rupee touched the 56 level in the futures markets. On Thursday, May 23, the national currency closed at Rs 55.90, which is a new low after August 2012. By Friday, the rupee recovered a bit but this is not expected to be sustained as the outlook for the currency remains weak.

Ben Bernanke, the Chairman of US Federal Reserve said that the Fed will reduce asset purchases in the coming months if the US economy shows some improvement. Besides this, China, the second largest economy in the world, saw its manufacturing sector shrinking. As per HSBC's Flash PMI data for China, the Manufacturing index has declined below 50, indicating a contraction in the sector for the first time in the last 7 months. This apart, the labour market conditions have also remained very tight, meaning that the economy is in a slowdown. Both of these developments remained a drag on the markets.

Europe also came out with a set of macro data in the week. The Manufacturing PMI numbers from Germany and France are encouraging. Overall, the Euro zone Manufacturing PMI numbers are at 47.8 against 46.7, while the Services PMI numbers are at 47.5 against 47. Though there is no expansion, the indices have not shown any contraction either, meaning that there is some positive movement in the economies. The European Central Bank President Mario Draghi also said that the EU is more stable than a year ago. However, Draghi has said that the challenges are still there. UK also announced its GDP numbers during the week, which were in line with the market expectations, pointing towards some stability in UK compared to last year.

The world markets have remained strongly under negative pressure in this week, mostly due to the weakness in China and Bernanke’s comments. The Japanese Nikkei saw a 7.3% intraday decline on Thursday after the country’s bond market turned volatile. The index closed the week with a 3.5% weekly loss. Shanghai remained flat, while Hang Seng closed with 2% losses. The European markets remained volatile, while the US indices remained flat in the week.

The weakness in the Chinese manufacturing sector also kept crude oil prices under pressure during the week, and they continued to show a downward bias. Precious metals gold and silver, however, traded flat with a positive bias.

Back home, on the sectoral front, all the indices remained under pressure except for IT. The Realty index lost nearly 12%, while Capital Goods closed with 8% losses. The results of L&T remained drag on the CG index. PSU, Power and Oil & Gas all lost 5% during the week. The Healthcare index too remained weak, following the USFDA alert on Wockhardt, recall of products by Glenmark and issues that Ranbaxy is battling, which dampened the sentiment on the sector.

During this week, a few stocks have remained in focus. The shares of Adani Power gained 13% in the week. Oracle Finance too gained 7%, while United Spirits gained 6.6%. Coal India also posted better-than-expected results, which lifted the stock by 4%.

Wockhardt was the top loser, down 31% over the import alert on its manufacturing facility in Waluj, Maharashtra. The company has since come out with a clarification, post which the stock has shown some recovery.

In the steel pack, JSW Steel and Tata Steel declared their March 2013 quarter results. JSW Steel reported a weak set of numbers, with a 2% decline in its topline and a 60% decline in its profits owing to lower realisations as well as higher depreciation and interest cost. Tata Steel, in contrast, has reported an improvement in its EBITDA margins. The company reported a loss of Rs 6529 crore, but its operating profits beat the market forecast.

Banking major SBI came out with its Q4 scorecard. The numbers were fairly disappointing, as the company has a reported 19% decline in its net profits. Its Gross and Net NPAs increased on a year-on-year basis, but declined sequentially. The bank’s Net Interest Income also dipped 4% in the quarter due to higher provisioning. Overall, the result disappointed the markets, and this has lowered the sentiment on the banking sector.

L&T’s Q4 results also suffered, with its net profit was down 7% at Rs 1,787.94 crore. The company’s net sales increased by 10% to touch Rs 20293 crore. Its shares took a hit, losing about 10% in the week.

The shares of Ranbaxy were down over 17% on the back of the news that Daichii Sankyo will sue Ranbaxy's ex-shareholders.

Overall, the market sentiment remains weak due to the crack in the global recovery. In the next week, the retail sales data of Japan, Europe is expected to be announced. Besides, Germany will also announce its employment data, and India and the US will come out with their GDP figures. The market will take cues from these numbers.