One look at the weak macro-economic environment and the global scenario and no one is surprised why the bulls are running for cover.
As the global price of crude scales new highs, inflation is a concern across the globe. India being no exception. Interest rates are not that low, inflation is at a high, the rupee is falling and cost pressures for Indian corporate on the rise. Foreign funds seem to have deserted Indian equities, for the time being at least. Technical and derivative signals also point to more weakness in the coming days.
The good news is that India's industrial production rebounded in April, from a six-year low hit in March, as a strong performance by mining and manufacturing sectors offset weakness in electricity. The deceleration in capital goods and consumer durables - two key components of the factory output - also showed signs of revival. The Index of Industrial Production (IIP) stood at 268.3 in April as against 250.70 in the same month last year, according to the Central Statistical Organisation (CSO). Industrial output growth declined to 7% in April 2008 from 11.3% in April 2007. This was above the average forecast of a 5.5-6.5% expansion.
On Monday, heavy selling pressure in RIL, Infosys, HDFC, ONGC and ICICI Bank dragged the benchmark Sensex to slip below 15,000 and the Nifty below 4,500 during the day. Realty stocks were thrashed. DLF and Omaxe slipped below their public issue price. The bulls managed to partially recover early losses led by the gains in select pharma and the metal stocks. Among the 30 scrips of Sensex, 27 stocks ended in red and only 3 stocks ended in green.
On Tuesday, the carnage continued. Realty stocks continued to get hit. But 9 Sensex stocks managed to end in the green. The Sensex and Nifty closed below 15,000 and 5,000 respectively. BSE Pharma was the only sectoral index to actually gain. Zydus Cadila and Aurobiindo Pharma rallied.
Finally the bulls called the shots on Wednesday. The market started on a firm note since Asian markets lifted the sentiments on the Indian bourses. Index heavyweights like RIL, Infosys and HDFC were in momentum. Realty stocks, after getting thrashed earlier in the weak, surged. DLF, HDIL and Unitech all gained. Even capital goods, power and banking stocks witnessed some buying interest. Mid- and small-cap stocks gained too. BSE FMCG was the only sectoral index to end in negative territory. On Thursday, the winning streak continued. But on Friday, the market was choppy the entire day and finally ended in the red once again. Selling was seen in metal, realty, power, FMCG and some oil stocks. Pharma gained. Ranbaxy Laboratories was the star of the day. The stock jumped on the news that Pfizer is exploring the possibility of a counter offer for Ranbaxy. Japanese pharmaceutical company, Daiichi Sankyo agreed to buy entire 34.8% stake in Ranbaxy from the promoters and will increase stake to 50.1% in near term. Institutions hold 41.28% stake the Ranbaxy Labs, in which LIC is the major holder with a 15.8% stake.