Markets 2% Lower, Ranbaxy Up 36% In The Week

The Indian markets tumbled again this week, losing 2% in the absence of any positive triggers. The rupee too has not shown any resilience and touched another low.

The most important event of the week was the announcement of Raghuram Rajan as the new RBI Governor, which admittedly came as a surprise. The new Governor has a tremendous task ahead to improve growth, curb inflation and stabilise the rupee.

Globally too, the equity markets were in the red, with the Japanese Nikkei taking the strongest hit. The improving US economy has led to a crash in the global equity markets over fears that the Fed may taper QE 3.0 sooner than expected.

Earlier in the week, India’s Services PMI numbers came in below than expectations. It also should be noted that this data is showing a contraction for the first time since 2009, which indicates that even the services sector has come under pressure now.

Macroeconomic data from the European markets released during the week showed improvement in manufacturing activity. The Italian GDP shrunk lower than expected, which is a good sign. Germany’s factory orders also have seen an improvement. UK's industrial production marked a rise in manufacturing activity.

The European equity markets, however, ignored the macro data remained volatile as they remained concerned on the liquidity conditions. Bank of England has said that it has tied the interest rates with the unemployment index, which means that the interest rates will only rise when the employment rate rises.

As regards the sectoral indices back home, only Metals, Realty and PSUs closed in green. Metals saw gains of over 5%. The Capital Goods index, though, was hammered by over 6%. Defensive sectors disappointed during this week as well, with an over 2% fall in the FMCG and Pharma indices.

The Auto numbers reported during the week in India were subdued, confirming the slowdown in the sector. Tata Motors’ numbers for the June quarter were weak, with the net profits down by 24%. The stock remained volatile during the week.

Ranbaxy's shares surprising surged by 36% as the company announced that it has received allocation of land in Malaysia. The results of the company for the June quarter were not very robust, as it reported a loss of over Rs 500 crore. The market is now expecting an improvement in its numbers on a sequential basis.

The shares of MCX nosedived for the second consecutive week. Financial Technologies was also down over the trading ban on the NSEL. It has also surfaced that the problems in the NSEL are bigger than they initially appeared.

The shares of BHEL and Tata Power also crashed in the said period. Wockhardt showed some positive trading on Thursday, but the stock remained in the lower circuit for most of the week.

This earnings season has mostly disappointed. With the results season drawing to a close, there appear to be no positive triggers in the offing. Hence, we believe that the markets would remain volatile in the next week too.