Weekly review: Sensex tumbles amid global tremors

Renewed fears of another recession hitting US, following S&P's downgrade, dragged the markets last week. The Sensex lost 466 points or 2.6% to 16,839.

Credit rating agency, S&P, downgraded US from its perfect AAA to AA+ on August 5, leading to fears about the strength of the economy as investors tried to stay away from risky assets. The lurking fears of a worsening crisis in Europe only exacerbated the jitters.

Foreign Institutional Investors turned sellers and sold shares worth Rs 2,727.6 crore in the week till Thursday.

The markets witnessed heavy selling on the first two days, with realty, IT and metals doing the bulk of the damage. The Sensex slipped to a low of 16,432 on Tuesday. Wednesday saw the markets reverse its six-day lossing streak with the Sensex touching a high of 17,256. Auto stocks rose, with IT staging a smart recovery.

However, markets once again fell on Thursday and Friday as as investors remained cautious over murky global outlook and expectations that the Reserve Bank of India would continue to hike rates after better than expected industrial output data. The Sensex and Nifty finally ended down 2.6% in the week.

Broader markets outperformed the benchmark. BSE mid-cap index slipped 1% to 6,513 while the small-cap index dropped 2.4% to 7,620.

In other news, the Industrial output data for June was reported at 8.8%, higher than expected at 5.5%, which flagged concerns that the RBI would hike rates by another 25 bps in September as growth in the short-term remained sturdy. The IIP data was much higher than 5.9% reported in May. Nomura in a research note said, “IIP jumped, due to a sharp rebound in capital goods production. Excluding capital goods, industrial output growth weakened further.”

Food inflation for the week ended July 30 accelerated to 9.9% from 8.04% for the week ended July 23, highest in four months. High food inflation dampened hopes of a pause in the rate tightening cycle.

Among sectoral indices BSE auto index was the only gainer - up 2.6% at 8,534. Auto stocks rose in spite of data showing that the domestic passenger car sales has declined by 16% to 133,747 units in July, 2011, from 158,767 units in the same month last year. On the other hand, two-wheeler sales increased by 13% to 1,056,906 units last month from 938,514 units in July, 2010.

IT was the biggest loser from the sectoral pack - down 8% in the week at 5,004. US downgrade hit IT stocks the most as the country is the biggest market for the software service providers.

Heavyweights, TCS and Infosys were the biggest IT losers - down 9% each during the week. HCL Technologies, Patni Computers, Wipro and MphasiS shed 7-8% each. The sole gainer in the pack was Core Projects - up 1.8% at Rs 298.

Metal and realty stocks took a beating with the indices dropping 4-5% each.

Metal losers included Tata Steel, Jindal Saw, Hindalco and Bhushan Steel - all of which declined 6-11% each. In the realty pack, Anant Raj Industries, Peninsula Land, Indiabulls Real Estate, Sobha Developers and D B Realty led losses. Sensex stocks - DLF and Unitech dropped 4% and 1.3%, respectively.

Tata Power was the biggest loser among Sensex stocks - down nearly 12% at Rs 1,088. Reports suggest that the company could be hit by higher payout for coal from its Indonesian mines.

Other big losers included Tata Motors - down 10% at Rs 801 after the company reported a marginal rise in Q1 net profit at 1,999.62 crore. Following this, CLSA has downgraded the stock to under-perform from outperform, with a revised target price of 790. The counter has clocked a volume of 3,28,000 shares so far.

However, another from the auto pack - Mahindra & Mahindra soared 13% during the week to Rs 740. Hero Honda, Maruti Suzuki and Bajaj Auto gained 4-6% each.

Other gainers in the Sensex included NTPC, Jaiprakash Association, ONGC and ITC.