Weekly: Iraq woes stall market rally; risk aversion sets in

Realty, PSU, oil & gas, metal, power and banking indices were the major draggers, with losses of 3-6%

The bull run on D-Street hit a roadblock this week, with the Nifty posting its biggest single-day fall in nearly four and a half months. The risk aversion was triggered on account of escalating violence in Iraq, as crude oil scaled to nine-month high, threatening to derail the improvement in subsidy bill and trade deficit.

Brent crude rose to over $113 a barrel, up $4 this week, on concerns that insurgency in Iraq might trigger a civil war and eventually crimping  oil exports.

Also, monsoon rainfall was 48 per cent below average in the week to June 11, data from the weather department showed, reflecting the late arrival of monsoon.

For the week, the benchmark Sensex-30 slipped 0.66 per cent to 25,228 and the Nifty closed below the 7,550 down 0.54 per cent at 7,542.

The broader markets faced a steeper correction, as the Midcap Index slumped nearly two per cent and the Smallcap Index gave off a little over one per cent.

Defensives were back in focus during the week with information technology (IT) and Health Care being the preferred picks. The respective indices added four-six per cent. Auto names too witnessed a rally post the encouraging sales numbers posted for May.

The drubbing was maximum in some of the pockets, which were out-performers in the Hope rally. Realty, PSU, Oil & Gas, Metal, Power and banking index were the major draggers, with cuts of three-six per cent seen on indices.

Consumer durables and FMCG indices too were down a per cent each.

IT majors TCS, Infosys and Wipro were among the top gainers over the last five trading sessions with gains between four and six per cent. Infosys surged on heavy volumes, as the company announced the selection of Vishal Sikka as chief executive officer and managing director of the company.

From the health care space, Dr Reddys, Cipla and Sun Pharma added four-five per cent.

HDFC twins, which added up to 4.5 per cent, were the only scrips to end the week in green from the financial space among Sensex-30.

Auto majors, Maruti Suzuki and Bajaj Auto advanced 0.4 per cent and six per cent, respectively.

Oil and gas majors Reliance Industries and ONGC dropped 3.4 per cent and nine per cent on rising violence in Iraq and were the major index draggers.

BHEL, Axis Bank, NTPC, Tata Power, Bharti Airtel, Tata Steel and Sesa Sterlite down 5.5-9.5 per cent were some of the other major losers.

Macro Resurgence

After falling for two months, industrial production grew at a 13-month-high rate of 3.4 per cent in April, driven mainly by electricity generation and manufacturing. The numbers, if sustained, could push up economic growth, stuck below five percent for two years now.

Exports grew by a six-month high of 12.40 per cent at $27.9 billion in May this year against $24.91 billion in the same a year ago. The outbound shipment was driven by 28.7 per cent increase in petroleum products and 22.09 per cent in engineering goods, showed official figures released on Saturday.

Imports, on the other hand, contracted 11.41 per cent at $39.23 billion in May against $44.28 a year ago. This was partly reflective of 72 per cent decline in gold imports. As such, trade deficit declined by 42.01 per cent  at $11.23 billion in May against $19.37 billion in the same month of 2013-14.