The movements in the equity markets the last week were driven by three factors – how the government would clear the looming uncertainty over the proposed transaction tax, the quarterly earnings figures and news about monsoons. Even though the earnings numbers brought some smiles on the faces of investors, the monsoons continued to play truant and the government continued to procrastinate over the announcements regarding taxation of capital markets.
The equity markets began the week amidst uncertainty over the proposed transaction tax and particularly its impact on certain sections of the trading community – the day-traders, arbitrageurs and jobbers. As a result, volumes were low and the stocks slipped. However, the reverses suffered at the beginning of the week were offset by a broad-based rally in the last two trading days particularly in select mid-cap stocks. Riding this sentiment, the CNX Mid Cap 200 rose by 6.54 per cent over the week, outpacing the S&P CNX 500 (which rose by 1.6 per cent). The S&P CNX Nifty and the BSE Sensex gained 0.36 per cent and 0.12 per cent respectively. This was due to a widespread belief in the market that the mid-cap stocks are attractively valued and also that most of these companies are likely to report good financial performance in the first quarter of the current fiscal.
Among sectoral indices, the BSE IT was driven by yet another strong result by Infosys on Tuesday. Mastek, Satyam, Patni and Polaris were the other gainers. As a result, the BSE IT Index gained 5.66 per cent. The FMCG sector was gripped with fears that a delayed or weak monsoon would severely dent their bottomlines. ITC was the big loser and the BSE FMCG Index fell by 0.6 per cent. Healthcare stocks faced mixed fortunes. The BSE Healthcare Index was only a marginal gainer, increasing by 0.5 per cent. The BSE PSU Index was a major gainer as a result of the public sector banking and oil stocks doing well. The index was up by almost 2.7 per cent. Banking stocks witnessed mixed fortunes as the losses suffered earlier in the week were reversed to a large extent by the gains registered by UTI Bank and ICICI Bank.
Volumes suffered till the mid-week as a result of a boycott call by the daily-traders, arbitrageurs and jobbers but as news started trickling in that these entities might be exempted from the transaction tax, volumes returned to their earlier average levels. But, the boycott call was enough to bring down the daily average combined turnover on both NSE and BSE by a whopping 17.7 per cent. FIIs halted their buying spree of the two earlier weeks and turned net sellers. Perhaps, the uncertainty shrouding the equity markets finally got to them. They shed a combined Rs 152 crore from their portfolio. Only, Tuesday was an exception when they were net buyers to the tune of Rs 112 crore. Mutual funds too were net sellers, reducing their total holdings by almost Rs 57 crore till Thursday evening.
The NASDAQ plummeted 3.25 per cent as a result of disappointing earnings report by Intel further strengthened the general belief that the chip-making industry is headed for tough times. The Dow Jones too fell by 0.7 per cent.
Come Monday, the uncertainty over the proposed transaction tax could well clear when the finance minister addresses the Parliament. However, the earnings figures of Indian corporates and the predictions of the meteorological department will probably govern stock prices in the coming week.