Weekly: Sensex sheds 900 points in a week on global cues

Concerns over an early rate increase by the US Federal Reserve and mixed domestic economic data kept investors' risk appetite in check

Benchmark share indices posted their steepest weekly fall of the year dragged by financials on concerns over an earlier-than-expected rate hike by the US Federal Reserve and mixed economic data that showed a decline in industrial production for the second straight month in January and retail inflation peaking to a four-month high in February.

“It was a disappointing week for equity markets as benchmarks slipped over 3 per cent and slipped below their major support zone. Global concern mainly weighed on the sentiments of the domestic markets, after good economic reports from the US intensified speculation that Fed will go for an earlier than expected rate hike. Besides, participants even overlooked some positive domestic data and upheld the negative bias,” said Jayant Manglik, president (retail distribution), Religare Securities Limited.

In the week to February 20, the 30-share Sensex fell 946 points or 3.21 per cent at 28,503 and the 50-share Nifty ended down 290 points or 3.24 per cent at 8,648. In the broader market, the BSE Mid-cap Index declined 2.26 per cent, while the Small-cap Index fell 2.15 per cent, outperforming the benchmark indices. Strong US jobs reports led to a weak start for the markets as investors turned nervous over an earlier-than-expected hike in key rates by US Federal Reserve.

On the domestic front, India's current account deficit (CAD) at $8.2 billion in the third quarter of current fiscal quarter was lower than the figure of $10.2 billion the previous quarter, the Reserve Bank of India (RBI) said in a statement on Tuesday. However, compared to the same quarter last financial year, CAD rose sharply from $4.2 billion. India’s trade deficit widened to $39.2 billion during the third quarter of current fiscal from $38.6 billion in the previous quarter as exports fell 7.3 per cent, while imports declined 4.5 per cent.

The uptick in retail inflation at 5.37 per cent in February from 5.11 per cent in January also curbed risk appetite by dimming the possibility of further rate cuts by the RBI. The fall in January industrial production at 2.6 per cent from 3.2 per cent in December raised concerns over the extent and durability of India's economic growth.

However, the International Monetary Fund (IMF)'s latest report that raised India’s economic growth forecasts to 7.2 per cent in the current fiscal year, compared to 5.6 per cent as predicted earlier came as a boost in the arm along with the passage of insurance bill in Parliament, which brought some gains to the markets. On Tuesday, the Lok Sabha cleared the contentious land acquisition Bill, along with nine amendments proposed by the government. Meanwhile, foreign investors were net buyers in equities to the tune of Rs 673.41 crore during the week, as per provisional stock exchange data.

Week ahead

Traders will keenly watch the release of wholesale price inflation data for February on Monday, rupee movement against dollar, investment by foreign portfolio investors, US FOMC meet announcement and US jobless claims, along with broad global trends and developments in the on-going Budget session of Parliament, in the coming week.  Investors will also keenly await the fourth and final instalment of advance tax payment figures that would throw light on fourth quarter earnings.