Weekly: Markets end 2% up on hopes of economic reforms

Sterlite Industries top gainer on the Sensex

Benchmark share indices ended 2% higher in the trading week ended August 10 after the new Finance Minister P Chidambram emphasised that his priority would be to return back to the path of high growth for which he would shortly unveil path of fiscal consolidation and speedy economic reforms The Sensex jumped 360 points or 2.1% to end at 17,557 and the Nifty ended at 5,320, up 2% or 105 points.

The BSE Sensex touched a four-month high on Tuesday, as rate-sensitive companies rallied on hopes the Reserve Bank of India (RBI) will be pressured into cutting interest rates after the finance minister said high borrowing costs were burdening consumers. He also emphasised on fiscal reforms which helped sentiment, easing some of the growing worries the government would delay action, despite facing slowing economic growth and a worsening global risk environment.

Industrial production contracted 1.8 per cent in June, official data showed on Thursday. The contraction was in sharp contrast with the whopping 9.5 per cent expansion in the same month last year. Within manufacturing, capital goods production fell sharply. Also, initial signs of the impact of a weak monsoon on the consumer non-durable sector became evident. Capital goods production dropped by a huge 27.9 per cent and and consumer non-durable goods production fell by a moderate one per cent.

On the global front, China's exports grew just 1.0 per cent in July from a year earlier, much weaker than market expectations for an 8.6 per cent rise, while imports grew 4.7 per cent, against expectations for 7.2 per cent.

This followed softer Chinese inflation and industrial production data on Thursday, which reinforced market expectations that Beijing will further loosen monetary policy before the end of September to underpin growth.

Back home, index heavyweight Reliance Industries zoomed 5.3% to close at Rs 782, near its highest level since March 15, 2012, after the oil ministry agreed to conditionally approve the capital expenditure plan of over $1 billion for KG-D6 gas block.

Metal stocks also witnessed buying in trades this week. Sterlite Industries surged 9% to 111. Hindalco and Jindal Steel also advanced 5 and 3.5% each respectively.

Mahindra & Mahindra advanced 8% to 739 after, India's biggest utility vehicle manufacturer, posted a better-than-expected 20% rise in quarterly profit as strong demand for its sporty cars offset sluggish sales at its key tractor business, boosting its shares. Hindustan Unilever, Tata Motors, Infosys, Bajaj Auto and Maruti Suzuki also ended higher by 3.5-5% each.

On the other hand, Bharti Airtel was the top loser among the Sensex stocks, it slipped nearly 14 per cent to end the week at Rs 255 after the company reported its tenth straight quarter of net profit decline due to higher operating costs. The company said consolidated net profit fell to Rs 762 crore for its fiscal first quarter ended June 2012 from Rs 1,215 crore a year earlier as stiff competition squeezed margins. EBITDA (earnings before interest, tax, depreciation and amortization) margin went down by 310 basis points to 30.2%.

State Bank of India was also among the top losers. The stock tanked 6% top close at Rs 1,887 after its net non-performing assets (NPAs) surged 28% to Rs 20,321 crore for the quarter ended June 2012 from Rs 15,818 crore at the end of March 2012. They stood at Rs 12,436 crore at the end of June quarter last fiscal.  The gross NPA rose to 4.99% in Q1FY13 from 4.44% in Q4FY12. In absolute terms, the gross NPA increased to Rs 47,156 crore from Rs 39,676 crore during the quarter under review. Meanwhile, the bank has reported 7% quarter-on-quarter fall in its net profit at Rs 3,752 crore. Hero MotoCorp, Dr Reddy's Labs, HDFC and ONGC were also amongst the losers.

Driven by better than expected first quarter earning posted by Mahindra & Mahindra, the BSE auto index advanced nearly 4% to close as the top sectoral gainer. IT, metal, FMCG, oil & gas and capital goods indices were also up nearly 2-3.5% each. At the same time, consumer durables and the realty indices were amongst the notable losers.

The broader markets under performed the benchmark indices. The BSE mid-cap index closed higher by 0.4% at 6,100 and the small-cap index closed absolutely flat at 6,550 levels.