It could have been worse
The beginning of the week wasn't as rosy as the end. All the euphoria of the past five months seemed to be gone in just two trading sessions. After being on a dream run, the markets were looking for an excuse for correction. The Reserve Bank of India's announcement of a hike in the CRR became a trigger. Also, lower-than-expected industrial production data contributed to the bulls' misery. Industrial output growth for October slowed to a 10-month low, much lower than estimated. Production at factories, utilities and mines grew by just 6.2% from a year earlier, after gaining 11.4% in September. Capital Goods stocks were the worst hit as growth in Capital Goods was sharply down from last year. The surprisingly weak data raised questions over the growth of the Indian economy. BHEL, Tata Steel, ITC and SBI were the major losers in the Sensex. While, Satyam and Dr Reddy's were among the notable gainers.
Selling was seen in Auto, Sugar, Capital Goods, Metal, Mid-cap and Oil & Gas stocks. While IT stocks bucked the negative trend and closed with gains led by Satyam. Finally, the Sensex closed the week at 13614.52, down 1.3% or 185 points after hitting a low of 12,801.65 and a high of 13,801.98. The NSE Nifty fell by 1.85% or 73 points to close at 3888.56 as the indices recorded their second consecutive weekly decline.
Banking stocks bore the brunt of the selloff after the RBI unexpectedly raised the CRR by 50 basis points. The action will drain Rs135bn from the banking system, at a time when the demand for credit is pretty strong. Index heavyweight SBI lost by over 6.5% to Rs1264, while HDFC Bank dropped 2.5% to Rs1057 and ICICI Bank edged lower by 0.7% to Rs870. Among the Mid-Cap stocks, PNB lost over 8% to Rs507 and Bank of Baroda slid 5.8% to Rs246.
Selling was also seen in FMCG stocks. Index heavy weight ITC declined 5.5% to Rs174, HLL dipped 1.5% to Rs230 and Nestle slipped by over 1.9% to Rs1063. However, Colgate bucked the negative trend and surged 2% to close at Rs381. Among the auto stocks Bajaj Auto fell by over 2.9% to Rs2571, Maruti shed 2.8% to Rs905. Hero Honda was down 1.7% to Rs730 and Tata Motors dropped 1% to Rs857.
Capital Goods stocks were on the receiving end following lower than expected growth in IIP. Companies across the sector managed to recoup some of the losses, as the long term view on the sector remains positive with increasing infrastructure activity and expansion in capacities by the companies. BHEL declined by over 5% to Rs2496, Punj Lloyd dropped by over 1% to Rs1011, Siemens was down 2.9% to Rs1132. However, L&T gained 0.5% to Rs1459.
Sugar stocks attracted interest as reports stated that the Government may lift a ban on sugar exports between December 18-21. The ban was introduced in July to curb rising prices due to tight supplies, and was due to run until the end of the financial year in March. But, given the selling across the board, most of the sugar scrips ended in red. Renuka Sugar plunged by over 10% to Rs476, Bajaj Hindusthan dropped 8.3% to Rs234, Uttam Sugar fell .6% to Rs35, Balrampur Chini was down 7.2% to Rs3 and Sakthi Sugar lost 6% to Rs105.
Among the telecom stocks, Reliance Communications performed exceptionally well and managed to close at a record high of Rs466, adding over 4%. The company is planning to acquire Hutch Essar, one of the leading GSM service providers in a bid worth up to US$14bn. However, other telecom stocks fell sharply with Bharti Airtel losing 2.7% to Rs616 and VSNL dropping 5% to Rs404. Cement stocks lost ground on the back of profit booking. ACC lost by over 4% to Rs1058, Mangalam Cement declined 4.4% to Rs197. Kakatiya Cement slipped 4.6% to Rs106, Grasim fell 1% to Rs2728 and India Cements was down 1% to Rs228.
SpiceJet zoomed by over by 5% to Rs56. New Delhi-based low cost carrier announced that it plans to raise US$118.5mn through a preferential allotment of equity shares to a clutch of foreign and domestic investors, including the Tatas. Airline stocks were also a buzz with reports that the Government may ease rules on local airlines that want to start international flights.
Aurobindo Pharma climbed by 2.5% to Rs696 after the company's Board approved a proposal to merge APL Sciences and Senor Organics, two wholly subsidiaries with itself. The company also received MEB Netherlands' approval for Simvastatin.