Weekly: Markets end lower on selling pressure from foreign funds

Weak corporate earnings and concerns over weak monsoon forecast has further dampened sentiment

Benchmark indices ended the truncated week 1.5 per cent lower amid selling pressure by foreign funds on continued worries surrounding retrospective taxation. Weak corporate earnings and concerns over weak monsoon forecast further dampened sentiment.

In the week to April 30, the 30-share Sensex ended down 426.63 points or 1.55 per cent at 27,011.31 and the 50-share Nifty shed 123.75 points or 1.49 per cent at 8,181.50.

In the broader markets, BSE Mid-Cap index lost 0.18  per cent and Small-Cap index dipped 0.58 per cent.

Analysts believe that in the May series, the Nifty can witness a reversal in its current negative trend as a pattern of bottom out formation is seen at its multiple supports of 8,145-8,160 zones with short covering activity.

Continued selling by foreign institutional investors (FIIs) amid tax concerns has cost India the most favoured emerging market (EM) tag in April. Foreign flows into Indian stocks so far this month are $1.8 billion, much lower as compared to peers South Korea ($3.9 bn), Taiwan ($3.4 bn) and Brazil ($2.3 bn), show data from Bloomberg.

The rupee closed at 63.43 on Thursday on the back of dollar demand from importers and weakness in equities.

The market was shut for trading on Friday on account of Maharashtra Day holiday.

Market outlook

“Markets last week has broken 200 DMA after a long time. We believe markets should take support at this level, as we have corrected 10 percent in month of April. This is the first big correction after Modi government came into power. We believe the quarterly earnings should be better than street estimates. Till now IT sector had muted earnings but the private banks have slated better than street estimates. We are trading at reasonably good valuation after this correction,” said Rahul Shah, associate VP, Equity Advisory Group of Motilal Oswal.

He added, “Currently we are trading at 19x fy 16 and therefore one should defiantly look for investing at current levels. Also positive measures from government on MAT, Financial bill, Subsidy sharing etc are likely to boost the markets. In the coming week, we should see momentum in the markets and Nifty is likely to reclaim 8450 mark in near term and face resistance at that level. Sectors to watch out for in the coming week are metal, banking, infra and energy.”

Key stocks

ICICI Bank soared 7.5 per cent after several domestic brokerages upgraded the stock with 'buy' rating on expectations of improvement in asset quality. Gross NPAs were up 3.78 per cent versus 3.4 per cent quarter-on-quarter while Net NPAs were up 1.61 per cent versus 1.27 per cent quarter-on-quarter.

Maruti Suzuki climbed 5.6 per cent after reporting a strong 61 per cent year on year net profit growth at Rs 1,284 crore for the fourth quarter ended March 31, 2015 on the back of higher volumes, material cost reduction initiatives, favourable foreign exchange and lower sales promotion expenses. Housing finance major HDFC shed 6 per cent after reporting a marginal rise of 8 per cent in standalone net profit at Rs 1,862 crore for the quarter ending March 2015.

Vedanta ( Sesa Sterlite) after posting a Rs 18,718-crore loss for the fourth quarter of FY15 on account of a massive impairment charge at its oil and gas business arm, Cairn India, caused by a sharp fall in crude prices.

Axis Bank surged over 7.5 per cent after the bank’s net profit grew 18 per cent to Rs 2,181 crore on the back of a 20 per cent rise in net interest income and 21 per cent increase in other income. In the telecom space, Bharti Airtel lost 4.4 per cent after the consolidated net profit fell 12.6 per cent to Rs 1255.3 crore in the March quarter compared with Rs 1436.5 crore in the December quarter.  

Outlook

The debate on the Constitution Amendment Bill in respect of Goods and Services Tax (GST) next week and the passage of the Land Acquisition Bill will be keenly awaited. The next batch of March quarterly results will dictate the trend on the bourse.