The Hindu Business Line : Weak earnings expectations drag indices

Stock indices remained under sustained pressure in the week as fears over possibility of below-par third quarter results rose , on the back of fall in advance tax payments made by companies.

Proposals of a second stimulus package and rate cuts by several public-sector banks failed to hold indices.

The Sensex lost 771 points or 7.6 per cent over the week. The Nifty lost nearly 7 per cent.

State Bank of India’s announcement of cut in lending and deposit rates late last week saw both the benchmark indices open in the green on Monday.

The bank slashed its lending rate by 75 basis points and deposit rates by 25 to 100 basis points across maturities. Bank of India and Bank of Baroda too announced a 75 basis point cut in lending rates and a 50-100 basis point cut in deposit rates during the week. But, the cut in interest rate mounts pressure on the net interest margin and profitability.

On these fears SBI fell 3.4 per cent, Bank of India was down by 4.4 per cent and Bank of Baroda fell by 4.3 per cent.

The indices oscillated between red and green zones as volatility was high towards the expiry of derivative contracts. The recoveries made by Sensex and Nifty were short-lived.

The advance tax collection from companies for the third quarter of this fiscal declined by over 22 per cent compared with last year.

Lower profit expectations in the next quarter following the drop in advance tax collections, turned sentiments negative.

The barometer indices closed in red in all the four trading sessions of the week.

Metal and Capital goods stocks were dumped by investors on fears of the economic slump deepening further. SAIL was down by 17.5 per cent, Tata Steel was down by 7.5 per cent, L&T fell by 9 per cent and BHEL was down by 9.8 per cent in the week.

Aurobindo Pharma surged 5 per cent in the week on four of its drugs being approved by the South African regulatory board and its new druggetting approval from the Canadian government.

The stock of Satyam Computers dipped by a further 16 per cent this week, as a fallout of the World Bank banning Satyam Computers for eight years from getting direct contracts from it.

The stock of Pyramid Saimira which opened 10 per cent higher on Monday on rumours of an open offer was knocked down after the company denied it later in the week. The stock closed the week losing 34 per cent.

The top losers this week besides Satyam Computers (in Nifty50) were SAIL down 17 per cent, HCL Technology down 16 per cent, Mahindra and Mahindra down by 14 per cent and ONGC Corporation that was lower by 12 per cent. The stocks that registered gains in the week were Bharat Petroleum that was up 2 per cent, Power grid up 1 per cent and Tata Power that was 0.5 per cent higher.

Realty basket hit

All sectoral indices closed in red last week.

The worst hit was the BSE Realty index, which lost 12.8 per cent .

Indiabulls Real Estate fell 19 per cent, Unitech dipped 18.4 per cent and DLF was down by 10.5 per cent in the week on fears of reducing demand and shrinking margins.

The BSE Auto, Bankex, Oil & Gas indices were all down by over seven per cent. FMCG stocks were the least impacted ones.

The BSE FMCG index fell by a little over 3 per cent. Inflation for the week dipped to 6.61 per cent from 6.84 for the previous week.

The BSE Mid and Small Cap indices fared better than the Sensex, slipping by just 4.8 per cent and five per cent respectively.

Commodities

The rupee closed at 48.44 against the dollar, depreciating from the 47.25 levels of the previous week on worries of falling stock prices and the ensuing capital outflows.

The news of OPEC’s production cut didn’t support crude oil and the commodity fell from $42.36 to $37.71. Gold closed the week at $844.45 per ounce, up 0.7 per cent.

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