Weekly update: Indices extend losses as Iraq crises deepens

BSE mid-cap index up 0.3% at 8,961.96, while BSE small-cap index rises 87 points to 9,761

Benchmark indices settled lower this week, as investors turned cautious amid tension in Iraq and the rupee’s fall against the dollar.

Concern on crude oil rose amid media reports attacks on NATO fuel trucks on the Afghanistan-Pakistan border. An increase in crude oil prices has stoked fear of an increase in fuel inflation and, consequently, India’s current account and fiscal deficits.

In tandem with weak equities, the rupee on Saturday closed 10 paise lower at 60.18 against the dollar, owing to higher oil-related demand for dollars, extending the rupee’s string of weekly losses to four.

The BSE Sensex fell 122 points, or 0.5 per cent, to 25,106, while the CNX Nifty slipped 31 points, or 0.41 per cent, to 7,511.

However, the broader markets outperformed the benchmark indices. The BSE mid-cap index rose 26 points, to 8,961.96, while the BSE small-cap index rose 87 points, to 9,761. On the macroeconomic front, annual Wholesale Price Index (WPI)-based inflation accelerated to 6.01 per cent in May from 5.2 per cent in April, data released by the government on Monday showed. WPI inflation for March 2014 was revised to six per cent from 5.7 per cent reported earlier. Meanwhile, the southwest monsoon has covered almost half the country, but pockets of worry remain. Of the 600-odd districts in the country, 328 were under watch, based on the rainfall in the first 15 days, officials said.

Crude oil
On Friday, crude oil prices fell from a nine-month high to below $115 a barrel, as concern that the ongoing violence in Iraq might lead to supply disruptions, eased. On Friday, Iraq government-led forces were concentrated north of Baghdad, planning to strike Sunni Islamists whose drive toward the capital prompted the US to send military advisors to resolve the crisis.

Sectors and stocks
The BSE automobile and oil & gas indices slumped about two per cent. Among the Sensex pack, Mahindra & Mahindra saw the steepest fall. The stock fell 7.12 per cent to Rs 1,142. Hero MotoCorp and Maruti Suzuki fell two-three per cent. In the banking space, ICICI Bank, HDFC Bank and State Bank of India slipped one-two per cent, while Axis Bank rose 2.67 per cent. Index heavyweight Reliance Industries Ltd (RIL) slumped four per cent. At the company’s annual general meeting, Chairman Mukesh Ambani said RIL would invest Rs 1.8 lakh crore in its businesses through three years. ONGC fell one per cent on concern its subsidy burden would rise due to an increase in crude oil prices. Information technology stocks surged after the US Federal Reserve on Wednesday gave a positive assessment of the US economy and committed to retaining its accommodative monetary policy. Infosys, Tata Consultancy Services and Wipro surged one-four per cent.

Weak ahead
In the coming week, the markets are expected to be range-bound, as investors track the goings-on in Iraq, the progress of the monsoon and updates on the Union Budget. Foreign fund flows, global cues and the rupee’s movement against the dollar will also be significant for domestic equities.

With inputs from Capital Market