Benchmark share indices ended over 1% lower in the week to February 1 weighed down by profit booking in rate sensitive stocks after the Reserve Bank of India at its policy meet struck a cautious note on further easing as it awaits government's plan to control the rising fiscal deficit and said that inflation continues to remain above its comfort zone.
Further, the sharp reduction in growth forecast by the central bank for 2012-13 also weighed on market sentiment.
The 30-share Sensex ended down 322 points or 1.6% at 19,781 and the 50-share S&P CNX Nifty slipped 76 points or 1.2% to close at 5,999.
Meanwhile, the January 2013 Futures and Options contracts expired on Thursday.
Profit booking was seen in most of the sectors except for the defensive pharma and FMCG along with Consumer Durables. Capital Goods Index was the top loser among the sectoral indices on the BSE, followed by Oil & Gas, Auto and Power indices.
However, the broader markets outperformed the benchmark indices as the BSE Mid-cap index ended down 0.1% and the Small Cap index ended 1.2% lower.
The RBI in its third quarter monetary policy review on Tuesday surprised the market by cutting short-term lending rate called repo by 0.25% to 7.75% and Cash Reserve Ratio (CRR) by similar margin to 4%, releasing Rs 18,000 crore primary liquidity into the system.
The Reserve Bank of India also lowered its growth projection for the Indian economy as new investment demand continues to remain muted. The banking regulator now expects the domestic gross domestic product (GDP) growth at 5.5% in the current financial year. It had earlier projected 6.5% growth in July, 2012. But lowered it to 5.8% three months later as investment demand slowed, consumption spending moderated and export performance eroded.
Growth in Indian manufacturing slowed to a three-month low in January, as new export orders lost momentum, a business survey showed on Friday, underscoring the risks to India's economy from weak global demand, particularly in Europe.
The HSBC Markit manufacturing Purchasing Managers' Index (PMI), declined to 53.2 in January, after rising to a six-month high of 54.7 in December.
Bharti Airtel was the top Sensex loser down 8.1%. Profit of India's top mobile network operator, fell for the twelfth quarter in a row and missed estimates by a wide margin, dragged down by higher costs. The company saw its net profit fall to Rs 284 crore in the third quarter that ended December 31, from Rs 1,011 crore a year earlier.
In the capital goods space, Bharat Heavy Electricals ended down 1.8% after reporting 18% year-on-year (yoy) drop in its net profit at Rs 1,182 crore for the third quarter ended December 31, 2012 (Q3) on account of lower operational income.The company’s total order book position has declined to Rs 113,700 crore at the end of December 2012 quarter from Rs 122,300 crore as on September 2012 (Q2).
Engineering major L&T ended down 4.5% on profit taking after the stock rose post the announcement of its third quarter earnings last week on the back of encouraging order book position. The company said its order inflow grew 14% year-on-year (yoy) at Rs 19,545 crore during the October-December quarter (Q3).
State Bank of India ended down 4.1% on profit taking after recent gains. The bank reduced its base rate by 5 basis points to 9.7% and the benchmark prime lending rate by 5 basis points to 14.45%. The bank has also lowered interest rates on home loans. Meanwhile, Barclays downgraded SBI because of recent gains in its share price, noting also that credit stress could remain "elevated" due to the Indian state-run lender's exposure to midsized companies.
Other losers in the financial space, HDFC Bank ended 4.7% lower, HDFC slipped 3.3% and ICICI Bank ended marginally lower after rising to Rs 1,200 levels.
ICICI Bank said its consolidated net profit for the quarter ended December 31, 2012 increased by 22% from a year earlier to Rs 2,645 crore on the back of improved financial performance of banking and life insurance businesses.
"The biggest highlight for this quarter was our return on equity on a consolidated basis crossed the 15% mark. It is now at 15.7%. In 2009, we had indicated that we will improve our return on equity to 15% from 8%. We have achieved it because of our profit number," Chanda Kochhar, managing director and chief executive of ICICI Bank, said in her post-earnings comments.
In the auto segment, Tata Motors ended down 5.3% on concerns over JLR sales. Last week, the company said that sales for JLR, which accounts for a majority of Tata Motors' profits, have slowed significantly over the past quarter. Meanwhile, the stock crashed over 10% in intra-day trade on Friday.
The trades, which happened in the last 30 minutes of Friday’s trading on both the exchanges, were executed at prices below the market rates, resulting in both these stocks tumbling as much as 10% before trimming losses.
An NSE official said the orders were within the exchange’s limits and came from a single broker. The official clarified these were not freak trades, but clarified the exchange would look into the matter.
Tata Motors fell to as low as Rs270.15 on the BSE after six separate block deals comprising of 20 lakh shares were executed at around 3:06 PM. The stock recovered before closing at Rs285 on Friday, down 4.4% on the BSE.
Metal shares were also among the top losers during the week under review. Jindal Steel, Hindalco, Tata Steel, Sterlite Ind ended down 0.2-4% each.
Among the companies that will announce their third quarter earnings next week include, Bank of Baroda, Cipla, Tech Mahindra, ACC, Ambuja Cement, Hindalco, M&M and Sun Pharma among others