Weekly Report: Markets decline 1% as L&T helps trim losses

Markets dented weekly losses helped by upbeat earnings by infrastructure and auto firms and slight moderation in weekly inflation data. Sensex declined 205 points to 18,326 during the week while Nifty shed 58 points to end at 5,486.

The S&P CNX Nifty commenced the week on a lacklustre note after the state run oil marketing companies hiked petrol prices causing inflation concerns to re-surface. Nifty succumbed to selling pressure and touched a low of 5,401 mid week after State Bank of India fourth quarter net profit plummeted 99%. However, better than expected results by engineering conglomerate Larsen & Tourbo and Ashok Leyland helped the index trim weekly losses. On Friday the Nifty advanced 58 points, at 5,486 and the Sensex surged 185 points, at 18,326. Both benchmark indices Nifty and Sensex were down 1.1% for the week.

Inda Inc earnings weighed heavily on the markets as investors rewarded companies which reported better than expected results and battered shares that did not meet street estimates.

While markets were oversold and rebounded on Friday due to short covering, analysts do not expect any significant upside going forward.  Mr. Sanjeev Zarbade, Vice President (Private Client Group Research) from Kotak Securities said markets may continue to move sideways as inflation continues to remain high, the risk of further monetary tightening by RBI cannot be ruled out.

Although the week began with inflation concerns coming back, weekly inflation eased to 7.47% year-on-year against 7.7% reported during the previous week bringing some relief to the investors. Analysts said Monsoon will be a key event which will determine market direction as sub-normal rainfall will affect farm production and put further pressure on food inflation.

Among individual stocks Larsen and Tourbo topped the weekly chart. The capital goods bellwether zoomed 8% Rs 1,651 after the quarterly net profit surged 17% to Rs 1686 crore and the management forecasted 25% sales growth for the current fiscal which helped shrug off margin concerns.

From the auto space Ashok Leyland surged 3.4% to Rs 51 after the fourth quarter net profit jumped 24% to Rs 298 crore on high demand for trucks and buses erasing concerns over sharp spike in raw materials such as steel and aluminium.

Bajaj auto also recovered marginally and ended the week down 0.5% at Rs 1,330 after quarterly net profit more than doubled and sales zoomed 23% to Rs 4,052 crore.

Investors dumped country’s largest bank State Bank of India. The stock declined 12% to Rs 2,322 during the week after it reported net profit of Rs 20 crore, down 99% as it set aside more money for higher provisioning for loans and taxes.

FMCG major ITC was also out favour this week, the stock ended down 2% after lower than expected rise in fourth quarter sales, up 15.5% only.

Oil Marketing companies (OMCs) were very volatile and ended the week on a negative note. ONGC was the top loser down 10% after the management said that hike in oil subsidy will erase Rs 3,832 crore from companies profitability in FY10-11. The government raised the oil subsidy burden from 33.5% to 38% after the OMCs raised petrol prices by Rs 5 per litre earlier in the week. Indian Oil Corporation and Gail India slipped 7% each, Hindustan Petroleum and Bharat Petroleum were off 6% and 5% each for the week.

Among the sectoral pack, BSE Capital Goods index was the top gainer, up 4% on back of expectation in pick in investment cycle after L&T fore-casted robust growth rate. Besides L&T, BHEL advanced 2% and Crompton and Greaves zoomed 1.8%.

BSE PSU index was down 4% over questions on investors mind that if State Bank of India’s poor performance was just temporary and that new subsidy sharing formula would affect ONGC’s follow on public issue. Other PSUs such as Canara Bank and SAIL slipped over 8% each.

From the broader markets space, the midcap and the smallcap indices were down 2% as well.

From the midcap pack Kwality Dairy fell 27%, Anant Raj Industries declined 16% and Patni Computers was off 12.3%.

From the smallcap space, Falcon Tyres fell 23%, Excel Corporation and ITD Cement were off over 16% each.