Weekly report: Markets end week lower amid geopolitical risks

Rising crude oil prices raise fears of further widening of fiscal and current account deficits

Benchmark share indices ended lower for the second straight week tracking a sell-off in global equities amid rising tensions between Ukraine and Russia and after US President Barack Obama authorised air strikes in Iraq. On the domestic front, rising crude oil prices raised fears of further widening of fiscal and current account deficits, while the Reserve Bank of Indian (RBI)’s neutral stance on key policy rates flagging inflation concerns also weighed on investor sentiment in the week to August 8.

The 30-share Sensex ended down 152 points or 0.6 per cent at 25,329 and the 50-share Nifty ended down 34 points or 0.5 per cent at 7,569.

In the broader market, the BSE Mid-cap Index ended down 152 points or 1.7 per cent at 8,962, while the BSE Small-cap Index ended down 63 points or 0.6 per cent at 9,828.

RBI Governor Raghuram Rajan kept key interest rates unchanged. The repo rate and cash reserve ratio (CRR) was unchanged at eight per cent and four per cent, respectively. However, the RBI cut statutory liquidity ratio (SLR) by 50 basis points to 22 per cent in an effort to improve liquidity in the system. Bank shares were among the top Sensex losers during the week on fears that sharp hike in bond yields on the new 10-year benchmark government bond raised the risk that their bond portfolios could take a hit and treasury profits might come under pressure in the July-September quarter. Axis Bank, ICICI Bank, HDFC Bank and SBI ended down one-four per cent each.

Sesa Sterlite was the top Sensex loser down five per cent. Reports suggest that the company is planning to set up a large steel plant in Karnataka at a very huge cost.

Mahindra & Mahindra was the top Sensex gainer up nearly five per cent after an encouraging performance in the June quarter despite muted volumes in both utility vehicles (UVs) and tractors. Despite the muted volumes, the company managed to improve its operating profit by five per cent to Rs 1,419 crore and margins by 56 basis points (bps) to 14.3 per cent, compared to a year ago.

In the mid-cap segment, Bhushan Steel plunged 45 per cent during the week after the Central Bureau of Investigation on Thursday arrested the company’s Vice-Chairman and Managing Director Neeraj Singal in connection with Rs 50-lakh bribery scandal involving Chairman and Managing Director of Syndicate Bank S K Jain. Syndicate Bank ended down nearly 12 per cent lower.

Week ahead
Geopolitical tensions between Ukraine and Russia and the developments in Iraq would continue to weigh on the domestic markets in the truncated week ahead. The markets will remain closed on Friday, August 15, on account of Independence Day. Among the major companies that will announce their first quarter earnings include, SAIL, Tata Motors, Coal India, BHEL, ONGC, Tata Steel, IOC, Britannia Ind among others. On Tuesday, the government will release industrial production data for June 2014 and WPI inflation data for July, while on Thursday data on CPI inflation for July will be released.