Markets remain volatile in an eventful week

Markets remained relatively flat for the week as investors remained cautious ahead of the Finance Minister's Vote-on-Account presentation in the Lok Sabha on Monday

Through the week, the markets remained relatively flat, as investors remained cautious ahead of the finance minister’s vote-on-account presentation in the Lok Sabha on Monday. For the week ended February 14, the S&P BSE Sensex remained relatively flat, showing a marginal decline of 10 points, or 0.05 per cent, at 20,367. The CNX Nifty-50 ended 15 points, or 0.25 per cent, lower at 6,048.

Encouraging inflation data stemmed the fall in a volatile week that otherwise saw net outflows from foreign investors amid companies like State Bank of India (SBI), Cipla, Hindalco, and Coal India reporting dismal earnings for the quarter ended December 2013.

Markets witnessed significant volatility during the start of the week before gradually settling down towards the end. Foreign institutional investors (FIIs) continued to remain net sellers in domestic equity, selling Rs 344.5 crore worth of shares this week, as per data from Sebi. The India VIX, a volatility index based on the Nifty Index Option prices, gradually declined from 19.05 on Monday to close at 16.66 on Friday.

The interim Railway Budget for 2014–15, announced earlier in the week on Wednesday, was an insipid event that saw no major policy announcements. Passenger and freight fares remained unchanged and, not surprisingly, operating ratio moderately worsened to 90.8 per cent, from 90.2 per cent last year. The broader markets underperformed the benchmark index. The BSE Mid-cap Index slipped 25 points, or 0.39 per cent, while the BSE Small-cap was down by 0.78 per cent compared to Sensex’s moderate decline by 0.05 per cent.

At the global level, there were no surprises from the US Federal Reserve that decided to continue the taper of the bond-buying programme as per the schedule announced earlier in December.

Inflation dips

The Consumer Price Index (CPI) inflation slowed to a two-year low in January, as food prices helped bring down the overall retail inflation to 8.79 per cent in January, data showed. Food inflation fell sharply to 9.90 per cent in January, from more than 12 per cent in December. Core retail inflation, however, remained sticky at approximately eight per cent.

The Wholesale Price Index (WPI)-based inflation improved to an eight-month low of 5.05 per cent in January compared to 6.16 per cent in the previous month. The data came on a day when the government said the country was going to produce record food grain of 263.2 million tonnes in 2013-14.

“With sticky core inflation and elevated, and still rising, inflation expectations, the RBI, rather than betting on volatile vegetable prices to meet its de facto eight per cent intermediate CPI target, will have to tighten policy further if it is to regain a credible degree of inflation control,” points out Mole Hau of BNP Paribas in a recent report.

Sectors & stocks

Among the various sectors, the S&P BSE IT Index was the top gainer that moved up 2.12 per cent, as Nasscom indicated an approximate 15 per cent rise in exports for the industry. Consumer durables, auto, and oil and gas were the other major winners that gained between 0.7–2.1per cent.

On the other hand, S&P BSE Power Index tripped 2.79 per cent,  as state-run BHEL continued its downward slide due to its dismal December quarter financial performance. The S&P BSE Metal, FMCG, and Healthcare indices also showed significant decline between 1.4-2.6 per cent.

Among Sensex heavyweights, Tata Motors was the highest gainer, surging by 7.6 per cent for the week on the back of strong December quarter numbers. The company’s consolidated net profit surged 195.23 per cent to Rs 4804.80 crore, compared to the same period last year, primarily due to strong retail sales volume growth in JLR (Jaguar Land Rover).

Dug major Cipla was the top Sensex loser, declining by 11 per cent for the week after higher costs resulted in a 17 per cent year-on-year (y-o-y) fall in consolidated net profit to Rs 284 crore for the quarter ended December 31, 2013. Hindalco was the other notable loser and declined by almost six per cent, also due to dismal reported earnings. Going ahead, the markets will keep a tab on the interim Budget for 2014 to be tabled in the Parliament on Monday.