Mkts likely to be under stress

Weak rupee, falling metal prices are weighing on bourses

Fears over corporate earnings numbers and hiccups in the on-going Parliament session affected the market sentiment during the last week. Lack of positive cues, fall in the rupee value and slump in Chinese economy were other major factors that pushed the market barometer, Sensex, down by 351 points to end at 28,112.

Sensex opened weak at 28,544 on last Monday against previous week's closing and rallied up to a high of 28,573 on Thursday after seeking support at 28,071 on the previous day. It had once again fallen and solicited support at 28,084 on Friday before closing the week at 28112. If the markets fell below these two support points, then a further decline is quite possible in near term.

Also investors had turned cautious ahead of IT major Infosys’ first quarter numbers a day after. Sensex ended down 43 points at 28,420 as investors preferred to book profits. Further, investors were also cautious ahead of the monsoon session of the parliament with GST and Land bills in focus.

Although Infosys surged 11.3 per cent after its quarterly working results, Sun Pharma fell 15 per cent and along with HUL, pulled the markets down. Selling was reported in index heavyweights such as RIL, ITC, and stocks of select lenders. But for a rally in Infosys, the market would have fallen even more. Infosys gained the most on Tuesday in two-and-a-half years.

Galvanised by strength in Reliance and a rebound in Sun Pharma and HUL, the markets staged strong rebound on Wednesday, recouping two-day losses with the Sensex hitting a triple century led by banking and financials as well as oil & gas stocks. In fact, equity benchmarks outperformed global peers. Sensex ended at 28,504, stronger by 323 points.

The markets on Thursday lost due to profit-taking after seeing more than 300-points relief rally in previous session. Private banks, capital goods, select metals and pharma stocks dragged the market. Even weak earnings from Bajaj Auto and Lupin also dented sentiment.

Metal prices hit multi-year low on Friday after weaker-than-expected data from China and the Eurozone raised concerns about global growth, but the US dollar rose as a Federal Reserve rate hike was still on the table. Thus, after rallying by over 800 points in the previous week, the markets last week shed 351 points.

And looking at the log-jam in the Parliament, it is most likely that important economic reforms bills are unlikely to get through this time too. The weakened rupee and fall in metal stocks due mainly to recession in China, are likely to create further negative impact on the markets. Although, the dry spell has nearly ended in many parts of the country, that alone could not be expected to take the markets up in the near future.

The markets are most likely to remain under stress at least in the new week as the July derivative contracts are to be wound up due to the end of the account. The only bright spot would be jewellery stocks as on one hand the prices of precious metal, the main raw material for these, have gone significantly down just ahead of the demand season and on the other, the government has slashed tariff value on imports of gold. Investors are suggested to put their hands on select jewelley company stocks for medium to long-term investing.