Weekly: Markets end higher as US govt shutdown ends

Markets ended nearly 2% higher in the truncated week ended October 18, ending at 3-year closing highs, on expectations that the 16-day US government shutdown might prompt the Federal Reserve to postpone withdrawal of its monetary stimulus measures. Further, encouraging corporate earnings from major corporates so far and Jul-Sep GDP growth from China also boosted sentiment.

In the week to October 18 both the benchmark indices ended at nearly 3-year closing highs. The 30-share Sensex surged 354 points or 1.7% to end at 20,883 and the 50-share Nifty rose 93 points to close at 6,189.

Foreign institutional investors (FIIs) were net buyers to the tune of Rs 1,752 crore in Indian equities on Friday, according to provisional data, extending their purchases for the 11th straight day.

In October (till Thursday), FIIs have put about Rs 7,500 crore into Indian equities, taking the overall tally to Rs 78,600 crore since January. Analysts said the stability in the rupee vis-à-vis the dollar, which had weakened since the US shutdown early in October, played a key role in ensuring the deluge of FII money.

After the wholesale inflation clocked to a seven-month high, the retail inflation for September also accelerated to a three-month high, according to official data released on Monday, October 14.

The wholesale price index- (WPI) based inflation stood at a seven-month high of 6.46% in September, compared to 6.1% in the previous month.

The Consumer Price Index (CPI) based inflation rose to 9.84% from 9.52% in August mainly due to stark rise in vegetable prices. The prices of vegetables in September rose a massive 34.93% from 26.48% a month ago.

Metal shares were among the top gainers during the week under review on hopes that robust GDP growth in China would lead to higher demand for metals. China is the world's largest consumer of copper and aluminium. Tata Steel surged 6.7% to Rs 328.45 while Sesa Sterlite jumped 6.6% to end at Rs 195.30. Jindal Steel and Hindalco ended marginally higher.

Bharti Airtel, the largest telecom operator by subscriber base, on Friday, said that it has acquired Qualcomm’s stake in the Wireless Business Services Private Limited, a joint venture that held broadband wireless access (BWA) spectrum which is used for 4G services.

Bharti Airtel rose 6.6% to end at Rs 334.55.

Among the index heavyweights Reliance Industries and ITC contributed the most to Sensex gains during the week.

Reliance Industries ended up 4.9% to end at Rs 863 after the company reporting better than expected 1.5% year-on-year (yoy) growth in net profit at Rs 5,490 crore for the second quarter ended September 2013 (Q2).

Net sales however grew 14.8% yoy at Rs 103,758 crore mainly on back of higher petrochemical sales and refining segment sales.

Analyst an average had expected profit of Rs 5,437 crore and net sales of Rs 98,075 crore for the quarter.

Gross refining margins (GRMs) stood at US$7.7/bbl in Q2FY2014 (US$9.5/bbl in Q2FY2013 and US$8.4/bbl in Q1FY2014).

ITC ended up 3.5% at Rs 342. Last week the company's fully-owned subsidiary ITC Infotech, said it aims to become an end-to-end partner for its clients.

With this view, ITC Infotech has been strengthening its business consulting operations and expects it to grow three times over the next five years. The information technology (IT) consulting operations currently make for 1.5% of ITC Infotech’s total revenue, as against 1% a year ago.

Profit taking was seen in IT majors after recent gains following encouraging second quarter earnings. Among the IT majors, Wipro gained 3.8% while Infosys rose 1.3% and TCS ended marginally lower.

Financial shares witnessed volatility during the week but further gains remained capped at higher levels. SBI, ICICI Bank and HDFC Bank ended up 0.8-2.5% each.

Engineering major L&T ended down 1.1% because of lower net profit in the Jul-Sep quarter. Net profit for the quarter ended September fell 14 per cent to Rs 978 crore from Rs 1,137 crore in the corresponding quarter last year.

The company’s revenue, however, rose 10 per cent to Rs 14,510 crore, against Rs 13,195 crore in the year-ago period. Analysts attributed the revenue growth to a pick-up in execution in the engineering & construction and heavy engineering segments. In the quarter ended June, L&T’s revenue had risen only five per cent.

Tata Motors ended down 1.7% on profit taking after recent gains. Tata Motors-owned Jaguar Land Rover last week reported 17% increase in its global sales in September 2013 at 43,181 units.

Outlook

Further developments in the US following the end of 16-day shutdown will be on investors radar during the coming week.

Earnings from major corporates such as HDFC, Asian Paints, Cairn India, GAIL (India), Hero MotoCorp, AcC, Ambuja Cements, Kotak Mahindra Bank, ITC, NMDC and ICICI will be closely watched.