Weak global cues and a slowdown in foreign institutional (FII) buying saw Indian equities post their steepest decline in nearly one-and-a-half months. Falling for the fourth consecutive day, the Sensex ended the week with a 2.5% loss at 20,666.15, whereas the Nifty fell 2.64% to 6,140.75 — the biggest weekly drop since September 30.
For the week, FIIs in net bought $218 million compared with near $800 million of Indian shares purchased in the previous week and $672 million purchased in the week prior, as better-than-expected US economic data raised concerns of an early tapering of the quantitative easing programme — QE3.
US economy grew at a faster-than-expected 2.8% annual rate in the July-September quarter, raising the prospects that the US Federal Reserve could start to phase out it’s quantitative easing programme sooner than expected. Analysts were expecting US third quarter gross domestic growth (GDP) at 2.5%.
Most Asian and emerging market equities — Nikkei 225, Hang Seng, Shanghai Composite, Taiwan TAIEX, FTSE Straits Times, Stock Exchange of Thai Index — ended down in the range of 1-3%.
The fall in Indian equities was also accelerated by weakening of the rupee, which declined to the lowest level since September 30. Closing at 62.52 versus the dollar – against 61.73 in the previous week, the rupee clocked losses to the tune of 1.28% this week.
Shares of consumer companies — durables and staples — were among the biggest losers this week as concerns over slowdown in volume growth post the festive season coupled with high valuations triggered a sector-wide profit booking. BSE Consumer Durables index lost almost 7%, while BSE FMCG index declined over 3% — to fall to its lowest levels in two months.
Bank Nifty fell 6.2%, led by decline in HDFC Bank (-5.3%), ICICI Bank(-7.4%), State Bank of India (-7.2%). Shares of HDFC Bank ended lower for the fifth straight session on Friday, falling to the lowest level seen in three weeks. Punjab National Bank lost over 4% on Friday, taking its weekly loss to over 8%, after the state-owned lender's third quarter net profit fell 52.6% due to rise in bad loans.
Other losers included ONGC (-3.6%), Mahindra & Mahindra (-5%), Reliance Industries (-3.6%), Maruti Suzuki (-3.5%). Data suggests 23 out of 30 Sensex companies ended in the red.
“The rally was not sustainable. Until there is significant improvement in the macro-economic situation, we do not see the Nifty breaking out of the broad range of 5,400 – 6,100,” said Tirthankar Pattnaik, Director, Strategist-Institutional Research, Religare.
The week also saw two major foreign brokerages — Goldman Sachs and Nomura — raise their targets on benchmark indices citing changes in political scenario and improvement in macro as well micro economic situations.