Weekly roundup: Sensex snaps five-week gaining spree as Fed rate hike looms

On Thursday, Sensex had reclaimed its crucial 29,000 mark, hitting its two-year high of 29133 points

A surprisingly positive gross domestic product (GDP) growth data and globally US President Donald Trump’s non-combative speech to Congress may have taken the market to two-year high on the fourth trading day, the benchmark indices snapped five-week long gaining spree to end in red terrain as investors preferred to book profits ahead of the US Federal Reserve’s policy meeting on March 14-15 and back home state election results due on March 11.

During the week ended March 3, the S&P BSE Sensex fell 0.2% or 60 points to settle at 28832, while the Nifty50 lost 0.5% or 42 points to close the week at 8897.

On Thursday, the 30-share Sensex had reclaimed its crucial 29,000 mark, hitting its two-year high of 29133 points, while 50-share Nifty also rose as much as 8,989 in intraday trade before profit-booking pushed the both indices lower.

Midcap stocks underperformed the frontline indices. The BSE Midcap index slipped 0.9%, while the BSE Smallcap index lost just 0.2% for the week. 

“We feel Nifty will remain sideways in the next session too; however, there'll be no shortage of trading opportunities on stock specific front. Traders should use this phase to buy quality stocks at good bargain. Auto especially the two-wheeler pack looks strong along with select media, IT and banking counters,” said Jayant Manglik, President, Retail Distribution, Religare Securities.

Sectors and stocks

Sectorally, BSE PSU index (down 2.6%) shed the most, followed by BSE Power (down 2%), BSE Bankex (down 2%) and BSE Oil & Gas (down 1.8). BSE Auto and BSE FMCG slipped 0.9% and 0.6%, respectively. 

Among gainers, BSE Metal advanced 2%, while BSE IT and BSE Realty were up 1% each. BSE Teck and BSE Consumer Durables gained 0.6% and 0.3%, respectively. 

Among Sensex stocks, NTPC, Power Grid Corp and ICICI Bank plunged 6%, 4% and 3%, respectively, while Bharti Airtel and Axis Bank lost 3% each. Maruti Suzuki and Coal India dipped 2% each.

Gainers included Reliance Industries, Hero MotoCorp and Infosys, which rallied 6%, 3% and 2%, respectively. Hindustan Unilever and Tata Steel also gained 2% each.

Macro data

To the surprise of economists and market participants, the Central Statistic Office (CSO) on Tuesday showed that GDP expanded by 7% in the third quarter, belying all fears of the demonetisation derailing economic activity. The pace of the growth, however, slowed from 7.4% logged in the September quarter, but CSO retained its first advance growth estimate for the entire financial year 2016-17 at 7.1%.

Meanwhile, Nikkei India Manufacturing Purchasing Managers’ Index (PMI) inched up to 50.7 in February from 50.4 in January, while Nikkei India Services PMI stood at 50.3 in February, up from 48.7 registered in January.

Fed rate hike in March?

The US Federal Reserve looks set to hike interest rates in its next policy meeting on March 14-15 as leading policymakers including Chair Janet Yellen indicating the global economy seemed to have turned a corner, clearing the way for a rate hike “fairly soon”. 

 Yellen, in a speech on Friday signaled the Fed is set to raise interest rates this month if employment and other economic data hold up. She also said rates are likely to rise faster this year.

Traders now have priced in about an 85% chance of a hike during the March 14-15 policy-setting meeting, according to Thomson Reuters data. Those chances stood at roughly 30% at the start of the week.

MARKET NEXT WEEK: The week will start with investors reacting on Yellen’s fresh comments on rate hike in US. The ambiguity over state election verdict, however, may keep the market sideways. The outcome of the two-day GST Council meet, which begins on Saturday, will also be watched out for. Investors are concerned the Council may fix the peak GST rate at 40% instead of 28% agreed before.  “Investors are likely to take a wait & watch approach as the high valuation may turn the market to consolidation,” said Vinod Nair, Head of Research at Geojit Financial Services.