The week that was: Midcaps, smallcaps take big knock on Fed jitters

NEW DELHI: It was a week marked by concerns over a likely drying up of foreign inflows should the US Federal Reserve hikes interest rate in June. Sebi’s revised norms on participatory notes, too, made investor jittery, even though data showed foreign flows remained positive for the week.

Back-to-back commentaries of at least three US policymakers supporting a Fed rate hike (subject to continued recovery in the US economy) and latest minutes showing a consensus over a June rate hike pulled the dollar up against major world currencies last week, which hurt emerging market currencies and markets.

The outcome of the assembly elections in five states could not influence much sentiment, but select sectors such as logistics witnessed heavy buying on hope of early passage of the long-awaited GST bill.

Meanwhile, the week saw IMD forecasting a delay in the onset of monsoon in Kerala by a weak even as mercury rose to a record 51 degree celsius in Rajasthan.

The BSE benchmark Sensex moved in a 625-point range before ending the week at 25,251.90, down 188 points, or 0.74 per cent, for the week. The Nifty50 hit a high of 7,940.10 and low of 7,735.35, before closing the week at 7,749.70, down 65.20 points, or 0.83 per cent.

Midcap and smallcap indices took a big knock. The BSE Midcap index lost 1.19 per cent in the week while the BSE Smallcap slipped 1.33 per cent.

“As it has been the case for some time now, the Indian market has been operating in a very narrow range and going through a phase of consolidation. Also, it looks unlikely if this range would be breached on either side purely because of local reasons,” said Pankaj Sharma, Head of Equities, Equirus Securities.

The Fed minutes released this week will continue to create nervousness on Dalal Street next week, which is the last week of the results season, said Ravi Shenoy, VP-Midcaps Research, Motilal Oswal Securities.

“We do not see any near-term trigger for Nifty to take out the 8000 level. We advise investors to play it by the ear and remain stock specific,” he said Equity investors’ wealth, as suggested by BSE market capitalisation, climbed by Rs 1.05 lakh crore during the week to Rs 95.86 lakh crore.

Among the sectoral indices, the BSE Capital Goods index (down 2.3 per cent) led the laggards. It was followed by the BSE Power index (down 1.9 per cent), the BSE PSU index (down 1.7 per cent), the BSE Bankex (down 1.6 per cent) and the BSE Consumer Durables (down 1.3 per cent) index. The BSE Realty index with a 2.1 per cent rise remained the sectoral gainer for the week.

During the week, foreign investors pumped in Rs 1,494 crore into domestic equities, data available with NSDL showed.

Among specific stocks, ONGC (up 4.6 per cent) led Nifty50 losers. It was followed by Dr Reddy’s (up 4 per cent), ITC (up 3.4 per cent), YES Bank (up 2.9 per cent), Maruti Suzuki (up 2.6 per cent) and HCL Technologies (up 1.9 per cent).

Bank of Baroda (down 12.9 per cent) was the worst index performer. SBI (down 7.3 per cent), Adani Ports (down 5.6 per cent), Lupin (down 5.3 per cent), Tata Motors DVR (down 5 per cent and Cipla (down 4.6 per cent) remained prominent index losers for the week.

Week ahead

The market is expected to remain volatile on account of Thursday’s expiry of futures and options contracts. The coming trading week would perhaps be the busiest one this earnings season, with about 818 BSE-listed companies set to disclose their quarterly earnings. Some of the big results scheduled for the week include SBI, Larsen & Toubro, BHEL, Tata Steel, Bajaj Auto, GAIL, HPCL, India Cements, IOC, BPCL, Oil India, Tata Power, Central Bank, Cipla, Dish TV. Monday would see the least activity with 88 companies announcing their numbers. Thursday, on the other hand, will see 253 companies announcing their March quarter numbers.

“The Q4 performance of India Inc too has not been bad as the results were either in line or better than expectations in many cases. Going forward, over next 4-6 weeks, monsoon would be very important for markets. How it advances across the country and how the spatial distribution of rains is can really be a 'make or break' factor for the Indian economy and stock market,” said Sharma of Equirus Securities.

Globally, Monday will see PMI readings from Japan, Europe and the US. Japan’s export-import data for April will also be released on the day. Tuesday will see German ZEW Economic sentiment and home sales data in the US.

On Wednesday, data on crude oil inventories and home price index will be out in US. Japanese industrial activity data and consumer durables and jobless data in US will be keenly followed. Friday will see the release of US GDP numbers.

Traders wanting to go long may wait on the sidelines for some more time, said Jimeet Modi, CEO at SAMCO Securities.

“A series of extremely short-term lower tops are formed indicating continuation of the corrective pattern. Nifty50 needs time to correct the entire rise from 6825 to 7991 which unfolded itself in 36 trading days. The current correction has just lasted for 16 days. Counting 38 per cent retracement of the entire rise the market is expected to find strong support at 7,500. Nifty50 levels wherein traders can initiate long positional trades,” Modi said.