Markets retreat from record highs on profit-booking

Heavyweights TCS, HUL, HDFC, RIL led rally over the week; corporate results, Fed meeting among key triggers awaited

The markets were on a firm footing for the week ended July 25, supported by continuous buying from foreign institutional buyers and robust global cues which lifted the benchmark indices to fresh record highs. On Thursday, the Sensex registered its longest eight-day rally in the past almost two years. The 30-share Sensex surged 1,265 points between July 15 and July 24.

Meanwhile, the Intern-ational Monetary Fund chopped its 2014 forecast for global economic growth to take into account weakness early in the year in US and China. Out of the BRICS countries, only India avoided an IMF ratings downgrade, as business sentiment recovered after the Modi government took over.

Another major development was the approval of 49 per cent foreign investment in insurance companies through the FIPB. This move will help insurance firms get the much needed capital from overseas partners.

Over the last five trading sessions, the Sensex gained 485 points or 2 per cent to close at 26,127 and the Nifty advanced 127 points or 1.7 per cent to close the week at 7,790. Both the indices had hit  record highs of 26,300 and 7,841, respectively, on the last trading day of the week.

However, profit-booking was visible in the broader markets for the second consecutive week as both the mid- and small-cap indices closed in the red. The small-cap index was down 1.4 per cent and the mid-cap index lost nearly one per cent.

Movers & shakers

Defensives continued to be the preferred area of interest as the IT, FMCG and Health Care indices emerged as the top sectoral gainers with gains ranging between 2.6 per cent and 4.2 per cent.

Meanwhile, high-beta segments like Power, Realty, Capital Goods and PSU scrips fell off the buying radar, with the respective indices down 1.6-3.4 per cent over the last five trading sessions.

Profit-taking was also visible in the Auto, Metal, Consumer Durables and Banking spaces.

There was plenty of stock-specific action as the earnings season rolled in. Some of the prominent names that reported their earnings this week were Axis Bank, the HDFC twins and Wipro from the frontlines, where the numbers were almost in line with expectations.

However, there was disappointment in the broader market universe as Thermax, CEAT, Biocon and Polaris disappointed the Street with their Q1 numbers. Among the Sensex 30, 13 out of 30 stocks closed in the red. Sesa Sterlite, ONGC, SBI, Tata Motors, GAIL, Tata Power and BHEL, down 2-5 per cent, were the laggards.

On the other hand, HDFC, HUL, Bharti Airtel and Reliance Industries, up 4.6-8.5 per cent, were the top gainers. TCS, which hit a 52-week high and also became the first Indian company to exceed Rs 5 lakh crore in market capitalisation, ended the week on a strong note with nearly a seven per cent gain.

Week ahead

The Fed is scheduled to release the July FOMC statement in which the US central bank is likely to upgrade the assessment of the labour market. Infrastructure output data for June and the India and China manufacturing PMI data are scheduled to be out. L&T, HUL, ITC, Ranbaxy, Bharti Airtel, Lupin, Dr Reddy’s, Tech Mahindra, Maruti Suzuki, ICICI Bank, HCL Tech and NTPC are some of the companies expected to announce their quarterly numbers.