Markets gain third straight week on growth hopes

Despite the Supreme Court verdict on coal block allocations markets edged higher led by defensives

Markets gained in all the four sessions this week and continued their winning streak for the third straight time to end at fresh record closing highs on expectations of higher GDP growth in the first quarter of the current fiscal.

In the truncated week ended August 28, the 30-share Sensex ended up 219 points or 0.8% at 26,638 and the 50-share Nifty ended up 41 points or 0.5%  at 7,954.

Foreign institutional investors were net buyers in Indian equities to the tune of Rs 782 crore in the first three trading sessions this week while they were net sellers to the tune of Rs 711 crore on Thursday.  

The gains were led by defensive shares such as HUL, ITC, Dr Reddy's Labs and Cipla which gained between 3-5% each.

State-owned engineering major BHEL was the top Sensex gainer which ended up nearly 6%.

Metal and Power stocks witnessed a sell-off after the Supreme Court judgment termed all coal mines allotted between 1993 and 2010 as "illegal". Tata Power was the top Sensex loser down 7.1% while NTPC lost 3.2%. In the metal space, Hindalco, Sesa Sterlite and Tata Steel ended down 4.5-6.6% each.

Auto stocks rebounded after they said they will challenge the order of the Competition Commission of India (CCI) that has directed them to pay a fine of Rs 2,545 crore for alleged unfair practices relating to spare parts and technology sharing. Maruti Suzuki and M&M ended up over 1% each.

The commission claimed 14 companies, including Tata Motors, Maruti Suzuki and luxury car makers, were found guilty of violating trade norms after they failed to make their genuine spare parts available freely in the open market.

India's largest automaker Tata Motors too will be filing an appeal against this order before “appropriate authorities”. It further highlighted that the Rs 1,346 crore penalty levied on the company was calculated on the consolidated global turnover, which includes Jaguar Land Rover revenues, instead of turnover pertaining to its passenger vehicle business in India. The stock ended up 2.5%.

The government on Wednesday opened the railways for private and foreign investments in select areas - high-speed train, suburban corridors and dedicated freight lines. Foreign investment would also be allowed in construction and maintenance of these lines and rolling stock manufacturing facilities, electrification and signalling.

In some easing of investment rules for the defence sector, the government has apparently done away with the condition of 51% equity ownership by a single Indian partner while raising the foreign investment cap to 49% from 26%. Bharat Electronics surged nearly 14% while BEML gained 4% and Astra MicroWave ended up 3.5%.


Week Ahead

The Nifty is most likely to attempt breaching the 8,000 mark on the back of encouraging rollovers to the September series.

The first quarter GDP data will dictate the trend in the week ahead while the Supreme Court's decision on coal block allocations on September 1 will also be in focus. The government will release data for the first quarter ended June 2014 on August 29.

Further, investors would also track foreign fund inflows, crude oil prices and the rupee movement in the week ahead.

Auto companies will be in focus as they would start releasing sales numbers for the month of August. It may be recalled that auto sales in July car makers in India reported a 11.3 per cent jump, the third month of rising demand.

Meanwhile, HSBC Manufacturing PMI data due for release on September 1 and HSBC Services PMI data dur for release on September 3 will also be in focus.