Markets falter on muted earnings, Parliament logjam

Concern over the fate of key reforms including GST and land acquisition bill dampened the sentiments

Benchmark indices ended the week one per cent lower on muted earnings posted by blue-chips amid weakness among global peers. Further, concerns over the fate of crucial legislations, including the Goods and Services Tax (GST) and land acquisition Bill, following the first week of the monsoon session of Parliament being washed out, dampened the market sentiments.

In the week to July 24, the BSE Sensex dropped 351 points or 1.23 per cent to settle at 28,112.31, while the Nifty declined 88.30 points or 1.02 per cent to end at 8,521.55. In the broader markets, the BSE Mid-cap Index shed 0.64 per cent and the BSE Small-cap Index lost 0.41 per cent.
 

MARKET VIEW

“Markets ended the week down marginally. Markets closely tracked Parliament proceedings, where the deadlock continues. A strong jobs report in the US has increased the probability of an earlier rate hike in that country. Moreover, there were some concerns about bank exposures to some debt-heavy companies on Friday. On the other hand, monsoon has progressed well in the last few days, bringing down the rainfall deficit. However, that was overshadowed by the other concerns,” said Dipen Shah, head of Private Client Group Research, Kotak Securities.

“The next week will see the earnings season continue and stock-specific movements will be seen. We will closely watch Parliament proceedings, as passage of key Bills like GST are a pre-requisite for market sentiments to sustain and improve,” he added.

"I believe that the Monday’s session could be crucial, as a break and close below 8,500 can lead to a short-term correction. I believe the next crucial support can be in the range of 8,250-8,350 on spot Nifty, if such a breakdown occurs,” said Kunal Bothra, head-advisory, LKP Securities.

KEY EVENTS
The first week of the monsoon session, which began on Tuesday was a complete washout as the opposition insisted on the resignation of senior Bharatiya Janata Party (BJP) leaders involved in controversies before any Parliamentary business could be conducted.

Gold settled near five-and-a-half week low amid fears of rate hike by the Federal Reserve later this year. Jewellery shares rallied on easing gold prices. Gitanjali Gems, TBZ, Shree Ganesh Jewellery, Renaissance Jewellery, PC Jeweller and Rajesh Exports gained between 1 and 15 per cent.

Crude oil registered a weekly loss of more than 5 per cent on oversupply and lower China demand worries. Metal shares declined across the board on weaker-than-expected data from China raising concerns about global growth. Vedanta and Tata Steel lost 8 per cent and six per cent, respectively.

EARNINGS REVIEW

Infosys surged nearly nine per cent after it reported a five-per cent jump in the net profit on a y-o-y basis at Rs 3,030 crore and a robust volume growth for 2015-16. Wipro dipped 0.4 per cent after the net profit of the company declined 3.7 per cent on  a sequential basis.

Sun Pharma tanked nearly 12 per cent after the drug maker issued a profit warning. HDFC Bank reported a 21 per cent growth in net profit. However, bad loans rise marginally. The stock ended 0.3 per cent lower.

HUL reported profit of 0.2 per cent on a y-o-y basis to Rs 1,059 crore. The stock lost nearly 2 per cent during the week. Bajaj Auto shed one per cent after the company’s operating profit failed to meet the street expectations.

Reliance posted a 4.4 per cent increase in consolidated net profit for the June quarter at Rs 6,222 crore post-market hours on Friday. The stock gained 0.3 per cent.

WEEK AHEAD

Macroeconomic data, progress of monsoon, developments during the monsoon session of Parliament, trend in global markets, movement of rupee and crude oil price will dictate trend on the bourses in the coming week. Investors will keenly watch out for the Futures & Options expiry for July on Thursday.

Tech Mahindra, HDFC, Maruti Suzuki, PNB, YES Bank, Bank of Baroda, Dr Reddy's Lab, IDFC, ITC, Kotak Mahindra Bank and NTPC will announce the results in the coming week. The Federal Open Market Committee policy meeting on July 28-29, 2015 will be keenly awaited.