Markets cry in pain on global gloom

Macro data, global markets trend, FII stance, the movement of rupee and crude oil price movement will dictate trend

Key benchmark indices suffered huge losses, mirroring a sharp decline in the global equities as participants remained jittery on worries of a global economic slowdown. Volatility in crude oil prices and weakness in corporate earnings continued to haunt investors, resulting in persistent capital outflows.

In the week ended February 12, markets recorded the biggest weekly percentage drop since July 2009. The S&P BSE Sensex tanked 1,631 points, or 6.6 per cent, to settle below 23,000, at 22,986.12 and the broader Nifty plunged 508 points, or 6.7 per cent, to settle below 7,000, at 6,981.

“Overall weakness in corporate earnings, correction in  crude oil prices, liquidity crunch, government paralysis, inability to pass any major reforms such as Goods and Services Tax (GST), a tough stance by the Reserve bank of India, especially at a time when the world economies are looking at negative interest rates, rising non-performing assets (NPAs) are some of the other major reasons to add to the misery of markets,” said Kunal Bothra, head-advisory, LKP Securities.

“The best of the bear markets that India has seen, be it the 2000-2001 correction, or the 2008-2009 correction, have lasted for almost a year. We believe the scenario could be similar this time as well. Hence, it is difficult to assign any significant support level in this market, but I believe that even though this downtrend may continue for the next few months, it would provide a lot of rallies in between and won’t be a one way slide. The major short-term resistance, for the week though could be near 7,250 on Nifty,” he added.

Federal Reserve chairwoman in a testimony to Congress stated that a global economic turmoil and massive sell-off in global equity markets could spook the US economy. Back home, India’s gross domestic product (GDP) expanded at a slower pace of 7.3 per cent in the December quarter of the current financial year, compared to a 7.7 per cent growth recorded in the September quarter.  However, the GDP growth projection for the current financial year has been revised to 7.6 per cent. But amid the massive sell-off in global equities, investors ignored the growth estimates.

Key stocks

State-run Bharat Heavy Electricals slumped 21.27 per cent, after reporting a net loss of Rs 1,101.99 crore in the December quarter, compared to a net profit of Rs 212.60 crore in the corresponding period previous year.

ONGC tumbled 12 per cent after the company’s net profit fell 64 per cent to Rs 1,286 crore, on a 2.28 per cent decline in gross revenue to Rs 18,547 crore in the December quarter compared to the corresponding quarter in the previous financial year.

Adani Ports and Special Economic Zone fell 15 per cent. The company’s consolidated net profit rose 25.95 per cent, to Rs 644.96 crore on an 11.27 per cent increase in total income (Rs 1,895.75 crore) in the December quarter, compared to the corresponding quarter in the previous financial year.

In the health care sector, Dr Reddy’s Labs, declined eight per cent after the company’s net profit rose 0.82 per cent, to Rs 579.20 crore, on a 2.6 per cent increase in total income to Rs 3,980 crore, in the December quarter of 2015. However, Sun Pharma ended flat after the company’s consolidated net profit surged 258 per cent, to Rs 1,416 crore, on a 6.5 per cent increase in total income to Rs 7,301 crore in the third quarter. Cipla plunged seven per cent, despite the company’s consolidated net profit rose 4.68 per cent, to Rs 343.20 crore, on a 12.33 per cent growth in the net total income from operations to Rs 3,106.55 crore.

Automobile stocks hogged the limelight this week. Tata Motors tumbled 11 per cent, after its consolidated net profit fell two per cent to Rs 3,507 crore, on a 2.8 per cent growth in total income to Rs 72,437.02 crore in the December quarter. Meanwhile, Hero MotoCorp and Mahindra & Mahindra lost four per cent each.

Public sector banks declined across the bourses triggered by worries on sticky loans. Among private banks, Axis Bank, HDFC Bank and ICICI Bank lost up to eight per cent. State Bank of India, the country’s largest public sector bank, lost eight per cent, after its net profit fell 61.67 per cent, to Rs 1,115.34 crore.

Shares of public sector oil marketing companies will be in focus as a regular fuel price review is due during the middle of the month.

On Monday, markets are likely to react to the Consumer Price Inflation for January and Industrial Production data for December released on Friday. Index of Industrial Production (IIP) contracted an annual 1.3 per cent in December. Meanwhile, annual consumer price inflation edged up to a 17-month high of 5.69 per cent in January, driven up by higher food costs, according to a government data showed on Friday. Data on inflation based on the Wholesale Price Index (WPI) for January is due to be released by the government on Monday.