Broader markets outperform, key economic data in focus

Mid-cap shares were in demand while stock specific action was seen in shares of pharma, auto and industrials

The broader markets outperformed, even as the benchmark indices gained marginally for a second straight week amid stock-specific action, while select rate-sensitive sectors gained shrugging off the central bank's stance to keep key policy rates unchanged.

In the week ended August 7, the 30-share BSE Sensex ended up 122 points, or 0.4 per cent, at 28,236 and the 50-share Nifty closed 32 points, or 0.4 per cent, higher at 8,565. The BSE Mid-cap Index ended up 285 points, or 2.5 per cent, at 11,558 and the BSE Small-cap Index gained 274 points, or 2.3 per cent, to close at 12,104.

“There is a lot of stock-specific action mostly in fundamentally sound mid-cap shares post good April-June quarter earnings, while large-caps continue to remain sluggish. Public sector banks continue to witness buying interest on the proposed capital infusion by the government. Meanwhile, investors are likely to adopt wait-and-watch stance ahead of the key economic data to be released next week,” said Vaibhav Sanghavi, director, Ambit Investment Advisors.  

The Reserve Bank of India (RBI) at its third bi-monthly monetary policy early this week kept the repo rate unchanged at 7.25 per cent and also kept the cash reserve ratio (CRR) unchanged at four per cent.

The decision by the Employees’ Provident Fund Organisation to invest in equities through exchange-traded funds (ETFs) boosted sentiment during the week.

Further, the weather department forecasted that the country's southwest monsoon for the remaining two months (August-September) would be below normal at 84 per cent of the long-period average because El Niño weather conditions have strengthened.

Steel stocks had a firm grip during the week marked with volatility on reports that the government might hike the import duty on long and flat steel products to curb imports, especially from China. Sluggish export demand has also added to the woes of domestic steel companies. Tata Steel, JSW Steel and SAIL ended 6-10 per cent higher.

Pharma shares provided the booster dose in the latter half of the week after Dr. Reddy's Laboratories announced a strategic tie-up with Amgen. Dr Reddy's ended five per cent higher.

Most automobile shares ended in high gear despite weak first quarter earnings. Tata Motors reported 49 per cent drop in net profit at Rs 2,769 crore for the quarter ended June because of lower Jaguar Land Rover sales in China.  

Mahindra & Mahindra reported a marginal drop in net profit at Rs 852 crore for the April-June quarter because of slowdown in tractor sales. However, it beat Street estimates after a Bloomberg poll of analysts expected net profit to be at Rs 741 crore. Two-wheeler major Hero MotoCorp reported 33 per cent net profit growth year-on-year at Rs 750 crore for the April-June quarter because of lower depreciation expenses and input costs.

Industrials ended mixed with L&T gaining marginally on the back of robust order inflows during the quarter ended June 30, 2015. State-owned BHEL closed nearly five per cent lower after profits slumped 83 per cent to Rs 34 crore for April-June 2014 because of lower net sales which fell 15 per cent  year-on-year to Rs 4,281 crore.

Week ahead

The markets are likely to witness profit taking on worries on foreign fund outflows as robust US jobs data in July raised the prospects of hike in interest rates by the Federal Reserve.

Some of the major companies that will announce their April-June earnings include, Tata Steel, Sun Pharmaceutical, State Bank of India, Godrej Industries, NMDC, Bosch, Coal India, Ashok Leyland, Aurobindo Pharma, Jindal Steel & Power, National Aluminium Company, IndianOil Corporation, Tata Power, Bharat Petroleum Corporation, Hindalco and Steel Authority of India among others.

The government will release inflation based on the Consumer Price Index (CPI) data and industrial production data for June 2015 on August 12 and inflation based on the Wholesale Price Index for July 2015 on August 14.