Industry and Stock Specific trends
The sectoral indices closed with the S&P BSE Bankex, Auto, IT, Oil and Gas and PSU declining by 6.72%, 3.21%, 0.55%, 2.22% and 2.61% respectively last week.
Maruti Suzuki stock declined 7.77% to Rs.1636 last week on account of decline in revenues. The company announced Q3FY14 results with the net profit increasing 35.9% to Rs.6811 million on a 3% decline in revenues to Rs.1,06,197 million.
Tata Motors stock declined 5.57% to Rs.350 in the last week after the company announced the demise of its Managing Director Mr.Karl Slym. The company also announced that it is close to winning a defence contract with the Ministry of Defence for the supply of 1,239 heavy duty trucks. The deal for the six-wheel-drive high mobility vehicles (HMV), fitted with material handling cranes, has the option of a follow-on order for 600 more units.
Hero MotoCorp stock declined 3.18% to Rs.1970 in the last week as the company announced a 7.53% increase in net profit to Rs.5246.6 million with an 11.31% growth in revenues to Rs.68767.8 million on a year on year basis. Markets were expecting better numbers from Hero Motocorp leading to the fall in price.
ICICI Bank stock declined 6.56% to Rs.989 in the last week on back of the Q3FY14 results announced by the company. The net profit increased 12.53% to Rs.25322.1 million with a 15.4% increase in revenues to Rs.1,42,559.6 million on a year on year basis. The net Non-Performing Assets ratio increased to 0.81% compared to 0.73% in the previous quarter of Q2FY14.
Bharti Airtel stock rose 0.59% to Rs.315 in the last week on back of good Q3FY14 results announcement. The net profit increased 115% to Rs.6100 million with a 13.3% increase in revenues to Rs.2,19,390 million on a year on year basis.
Coal India stock declined 4% to Rs.248 as the Competition Commission of India (CCI) has ordered investigation under Section 26(1) of the Competition Act in respect of information filed by Wardha Power Company (Informant) against Western Coalfields (WCL) and Coal India (CIL). The Informant had alleged that WCL and CIL have abused their dominant position and the various clauses of the Fuel Supply Agreement were discriminatory.
Markets slide on RBI measures and Fed action
The Sensex and the Nifty declined 2.93% and 2.82% respectively last week on account of a surprise rate hike by the RBI coupled with the decision by the Fed to taper the stimulus for the US economy. The RBI unexpectedly raised the key repo rate by 25 basis points (bps) from 7.75% to 8% in the monetary policy meeting on 28th of January 2014. The decision comes on back of the recommendations given by the Dr.Urjit Patel Committee that sets an objective of below 8% CPI inflation by January 2015 and below 6% CPI inflation by January 2016. Accordingly the RBI has increased the repo rate by 25 bps to set the economy on the recommended disinflationary path. Further tightening in policy rates in the near term is not expected by the RBI if the disinflationary process evolves according to the above projections.
The Federal Reserve announced further taper in the stimulus in the form of reduction in bond purchases in the last week of January 2014. The Fed cut its bond purchase program of USD 75 billion by USD 10 billion in its January 2014 meet and indicated that it will continue to taper asset purchases by USD 10 billion in every meet. The interest rates are however slated to stay close to zero per cent as long as inflation expectations do not rise above 0.5% over the threshold level of 2% and unemployment rate is above 6.5% for the US economy. The announcement came in prior to the Real GDP growth data that was reported at 3.2% for the fourth quarter of 2013 for the US economy. The economy grew at 1.9% in the year 2013 over a 2.8% growth that was reported in the year 2012. Jobless claims were reported at 348,000 for the week ended January 26th 2014 as against revised claims of 3,29,000 for the week ended previous to last. The Dow Jones Industrial Average and the NASDAQ declined 1.82% and 1.13% last week.
The emerging markets witnessed volatility in the last week of January 2014 on announcements made by the Fed coupled with currency woes in most of the emerging market economies. The Turkish Lira, the Argentinian Peso, the Brazilian Real, the Russian Rouble and the South African Rand registered a decline in the value of their currencies on account of lax monetary policies adopted by central banks along with deteriorating economic conditions faced by the respective countries.
Crude oil prices declined 1.02% to USD 106.4 /bbl and gold prices declined 1.82% to USD 1240 /Oz on a week on week basis.
The equity derivatives market saw rise in open interest in Nifty Index futures by 2.26% while implied volatility of Nifty index options increased week on week. The implied volatility of Put options increased by 30.84% to 17.31% and that of Call options increased by 3.32% to 13.39% on a week on week basis. FIIs were net sellers to the tune of Rs.34.43 billion in the equity markets last week. Domestic Institutional Investors were net buyers to the tune of Rs.17.72 billion in the equity markets last week.
Table 1. Weekly Market Movement
Table 2. Weekly Gainers and Losers