Weekly: Markets consolidate after touching all-time highs

Benchmark share indices ended nearly 3% lower amid profit taking

Benchmark share indices ended nearly 3% lower in the truncated week ended November 8, 2013 as investors turned cautious and booked profits higher levels. Both the Sensex and the Nifty ended at all-time closing highs last week. Further, the warning by Standard & Poor's that it may lower India's rating also weighed on investor sentiment.

In the week to November 8, the 30-share Sensex ended down 531 points or 2.5% at 20,666 and the 50-share Nifty ended down 177 points or 2.8% at 6,141.

However, the broader indices outperformed the benchmarks as investors shifted focus to mid-cap stocks that are available at attractive valuations.

The rally last week was entirely led by foreign institutional investors after they infused nearly $4.5 billion in Indian equities during the past two months and have remained net buyers in November to the tune of nearly Rs 3000 crore.

Standard & Poor's said on Thursday it may cut India's sovereign rating to below investment grade should the next government fail to provide a credible plan to reverse the country's low economic growth.

Alternatively, the credit ratings agency said it may revise India's outlook back to "stable" should a new government have an agenda to restore growth, improve the country's finances, or allow the implementation of an effective monetary policy.

HSBC's Purchasing Managers' Index (PMI) data for India -- which tracks business conditions by surveying companies on new orders (domestic and exports) booked, employment, inventory levels and delivery times for manufacturing and services -- doesn’t appear promising. For the month of October, India's manufacturing PMI was at 49.6. Economists say that the
forward looking indicators are not very promising.

While October's PMI data for manufacturing shows a pick-up in export orders, thanks to a weak rupee and better demand in global markets, domestic orders have remained below the 50 mark for the fifth straight month. Inventories have risen even as new orders have fallen.

Stocks ended lower on all the four trading days of the truncated week weighed down by selling pressure in consumer durables and financials.

In the financial segment, ICICI Bank slipped 7.4%, SBI lost 7.2%, HDFC Bank declined 4.5%, and HDFC dropped 5.3%.

BHEL ended 5.6% lower after reporting a disappointing set of numbers for the second quarter ended September 30, 2013 (Q2). BHEL has reported a sharp 64% year-on-year (yoy) decline in net profit at Rs 456 crore due to 15% fall in net sales at Rs 8,819 crore on yoy basis. The Q2 numbers not strictly comparable due to merger of HPVP with the company. EBITDA margins contracted 1360 bps to 4.7% largely due to a combination of lower gross margins, under absorption of overhead costs and sharp increase in other expenditure.

FMCG majors Hindustan Unilever and ITC both witnessed selling pressure during the week under review down 3.8& and 2.8%, respectively.

Bajaj Auto ended down 2.7% after reporting 6% year-on-year (yoy) decline in total sales at 385,323 units during the month of October 2013 due to fall in commercial vehicles sales. The two-wheeler maker had sold 411,502 units in the same month last year.  The company’s commercial vehicle sales dropped 26% yoy at 37,000 units from 50,316 units, while motorcycles sales too, declined 4% yoy at 348,323 units against 361,186 units in October last year.

Index heavyweight Reliance Industries ended down 3.6% while exploration major ONGC also ended 3.6% lower.

Maruti Suzuki ended down 3.5% on marginal increase in October sales to 2% compared to the same month last year.

Week Ahead

Apart from second quarter earnings from large corporates, FII inflows and slew of economic data will be in focus in the week ahead. Markets will remain closed on November 14, Thursday on account of Moharrum. Further, the better-than-expected US jobs data release on Friday, Novemeber 8, will also be in focus after key US rallied over 1% each.

The September index of industrial production data is due for release on Tuesday along with the data on inflation based on the Consumer Price Index.

On Friday, the government will release data on inflation based on the Whole Sale Price index.

Some of the major corporates that will announce their second quarter earnings next week include, Britannia Ind, Glaxo Pharma, Hindalco, SAIL, Reliance Comm, MMTC, Sun Pharma, BPCL, Coal India, Cipla, M&M, ONGC, Tata Power among others.