The Sensex and the Nifty declined 1.34% and 1.47% respectively in the last week due to high Consumer Price Index (CPI) levels and contraction in the Index of Industrial Production (IIP) ahead of the mid-quarter monetary policy review that is scheduled this week. CPI inflation rose 11.2%, primarily attributable to spike in vegetable prices by 61.6% on a year on year basis. The core CPI inflation and the fuel inflation levels were reported at 8% and 7% respectively. October IIP declined 1.8% on a year on year basis with mining and manufacturing witnessing contraction of 3.5% and 2% respectively. The decline in the IIP is seen after consecutive growth seen from July 2013 to September 2013. RBI is expected to hike the repo rate by 25 basis points (bps) in the mid-quarter monetary policy review as inflation remains a big concern for the Indian economy.
The State Election results cheered the markets in the beginning of the week as the Bharatiya Janata Party (BJP) clinched absolute majority in Rajasthan, Chattisgarh and Madhya Pradesh and emerged as the single largest party in Delhi. The markets gained momentum after the Sensex and Nifty registered all time record high levels of 21,483 and 6415 respectively but failed to sustain the gain due to discouraging IIP and inflation data that was reported in the middle of the last week.
The Jobless Claims were reported at 3,68,000 in the first week of December as compared to a revised 3,00,000 claims from 2,98,000 in the previous week for the US economy. Taper fears are looming in the US economy ahead of the Federal Open Market Committee (FOMC) policy meeting that is slated this week. The Dow Jones Industrial Average declined 1.65% and the NASDAQ declined 1.53% on a week on week basis.
Crude oil prices declined 2.49% to USD 108.83 /bbl and gold prices rose 0.9% to USD 1240 /Oz on a week on week basis.
The equity derivatives market saw rise in open interest in Nifty Index futures by 12.74% while implied volatility of Nifty index options decreased week on week. FIIs were net buyers to the tune of Rs.3585 crores in the equity market in the last week. Domestic Institutional Investors were net sellers to the tune of Rs.3075 crores in the equity market in the last week.
Industry and Stock Specific trends
The sectoral indices declined last week with only the S&P BSE IT index closing positive with a gain of 1.6% on a week on week basis. S&P BSE Auto, Bankex, PSU and Oil and Gas indices declined 2.13%, 2.95%, 4.33% and 1.93% respectively in the last week.
Index of industrial production (IIP) declined 1.8% in October 2013, against 2% growth in the previous month September 2013. The decline in the output of manufacturing sector at 2% and mining sector at 3.5% mainly led to decline in IIP for October 2013.
Bharti Airtel stock declined 3.48% to Rs.321 on a week on week basis as the company announced a telecom infrastructure sharing agreement with Reliance Jio Infocomm which is a subsidiary of Reliance Industries Ltd. The infrastructure to be shared includes optic fibre network, submarine cable network, towers and internet broadband services for both the companies.
Larsen and Toubro stock declined 4% to Rs.1050 amidst the news that its subsidiary in the segment of shipbuilding has received orders worth USD 154 million for commercial vessels in the current financial quarter.
Rate sensitive stocks of Banks declined with SBI shedding 6.35% to Rs.1743 on account of speculation that RBI may hike the key interest rate in its mid-quarter policy review because of inflationary pressures in the economy.
Tata Motors stock declined 5.26% to Rs.370 in the last week on account of Jaguar Land Rover indicating an increase in the guidance for capital expenditure and R&D investments for the year FY 2014-15.
Table 1. Weekly Market Movement
Table 2. Weekly Gainers and Losers