RBIs hawkish tone weighs on markets, Sensex posts weekly decline of 2.6%

Written by fe Bureau | Mumbai | Updated: Sep 29 2013, 02:06am hrs
The benchmark indices declined nearly a percentage point on Friday on the back of comments made by Reserve Bank of India (RBI) governor Raghuram Rajan that inflation was still high. Investors were also cautious ahead of the current account deficit (CAD) data due on Monday.

The BSE benchmark index Sensex closed at 19,727, down 167 points, or 0.84%, while the 50-share Nifty was down 49 points, or 0.83%, to 5,833. Sensex ended the week deep in the red, down 2.6%. The NSE Nifty fell below its 200-day moving average for the first time in three weeks.

On Friday, both foreign institutional investors (FIIs) and domestic institutional investors (DIIs) were net sellers. FIIs sold shares worth $40 million, while DIIs sold shares worth $18 million, according to provisional BSE data. FIIs have bought $2.1 billion worth of shares in September so far after dumping $3.7 billion worth of shares from June-August. In the current calendar year, the overseas funds have been net buyers of $13.5 billion worth of Indian equities.

The fall in markets was led by telecom, metals and capital goods stocks. Within the 30-share Sensex, BHEL was the worst hit, with its share slipping 4.29% to R143 after a three-day rally of 16%. Tata Steel lost 3.89% to fall to a three-week low of R287. Bharti Airtel shed 2.84% to close at R325.

It was a disappointing week as benchmark indices declined in three of the five sessions. The BSE Sensex fell 2.6% after gaining in the last four weeks. On Monday, the BSE barometer fell 1.8% (363 points) after RBI surprised markets last week by announcing a 25-bps hike in its Repo Rate. According to market experts, the surprising hawkish stance taken by RBI made the markets volatile during the week.

Market sentiment has been weighed down by the central banks change in policy stance, which is focusing on inflation and the intent to achieve positive real rates. The market participants are expecting further hikes in the coming months, which has caused the volatility, said Rajesh Cheruvu, chief investment officer, RBS Private Banking.

The top weekly gainers included BHEL (6.4%), Sun Pharma (4%) and Hero Motocorp (3.3%). Banks were the major losers during the week, with HDFC Bank (-7.5%), ICICI Bank (-6.5%) and SBI (-6%) the worst hit. In terms of sectors, only BSE Healthcare Index gained during the week at 1.6%, while other sectoral indices declined. Realty index was the worst performer during the week, posting declines of 7%. Experts are bullish on export-oriented sectors. We continue to believe consumption and export-led segments are likely to outperform on account of favourable monsoons and recovery of demand in developed markets. In terms of sectors, consumer staples, heathcare and IT are expected to outperform, while financials, industrials and telecom are expected to underperform, Cheruvu added. Among peers, most Asian markets edged higher on Friday. The FTSI was up 0.5%, followed by Hang Seng, Kospi and Shanghai Composite, which gained 0.2%. Nikkei 225 fell 0.2%. Among the major European indices, the FTSE 100, the DAX and the CAC were all trading marginally lower at 5.30 pm IST.

Back home, 24 of the 30 Sensex stocks ended in the red. In the broader market, breadth was moderately weak with 1,227 stocks traded on the BSE ending lower compared with 1,147 stocks advancing. Most of the 13 BSE sectoral indices ended in the red. The BSE Bankex lost 1.8%, while the metal Index lost about 1.5%. FMCG, oil & gas and healthcare stocks posted marginal gains. The NSE cash turnover on Friday stood at R9,541 crore, while the turnover in derivatives segment stood at about R84,632 crore.