The week started on a disappointing note for investors as the Sensex slumped 667 points with financial stocks battered as sentiment turned weak amid heady valuations that are not supported by either macroeconomic data or high frequency indicators.
The heat was also felt on stocks that had run up over the past few weeks. Observers said that valuations in some of these stocks are running ahead of fundamentals and one of the main reasons was expectations of an economic recovery. However, such a turnaround is not expected until well into the next fiscal.
On the macro front, India’s manufacturing sector activity contracted at a slightly faster pace in July as demand conditions remained subdued, PMI data showed.
Moreover, there is some uncertainty with regard to the outcome of the three-day monetary policy committee (MPC) meeting that will end on August 6. Experts are divided over the possibility of a pause or a reduction in the policy repo rate.
The 30-share BSE Sensex, which opened in the red at 37595.73, stayed in the negative zone throughout the session to close at 36939.60, down 667.29 points or 1.77 per cent. Similarly, the NSE Nifty tumbled 181.85 points or 1.64 per cent to end at 10891.60. The Sensex has now lost 1,553.35 points in four days, while the Nifty has shed 408.95 points.
Tata Motors
Tata Motors hogged the limelight with its shares rallying 8 per cent, or Rs 8.35, to close at Rs 113.05 on the BSE. Though the auto major posted a net loss of more than Rs 8,400 crore for the first quarter ended June 30, this was ahead of expectations of some analysts. Further, brokerages are optimistic about the company’s road ahead.
Among the Sensex constituents, Kotak Bank was the top loser, slumping 4.41 per cent, followed by IndusInd Bank, Axis Bank, ONGC, HDFC Bank, Bajaj Auto and Reliance Industries.
Only six counters closed with gains —Titan, Tata Steel, SBI, L&T, HCL Tech and PowerGrid, spurting up to 3.15 per cent.
RIL and the HDFC twins fell by up to 3 per cent.
"As virus cases continued to rise and with the uncertainty regarding rate actions by the RBI, markets succumbed to the momentum slowdown visible in the last couple of trading sessions. Losses were led by financials. Although momentum has slowed down, stock specific action is still happening, dependent mainly on the earnings results and commentary. As long as the markets hold the current range, these downturns could be short-lived and should be utilized to accumulate quality stocks." Vinod Nair, Head of Research at Geojit Financial Services said.
Among the stocks, Tata Motors hogged the limelight with its shares rallying 8 per cent or Rs 8.35 to close at Rs 113.05 in the BSE. Though the auto major posted a net loss of more than rs 8400 crore for the first quarter ended June 30, this was ahead of expectations of some analysts. Further, brokerages are optimistic about the company’s road ahead.
``As the external environment gradually improves, we expect a sharp improvement in profitability and free cash flow (FCF). We continue to maintain the positive stance on the stock with a revised target price of Rs 141 (Rs 127 earlier) to factor in a significant improvement in CJLR (JLR’s JV in China) profitability and volumes, a sharper 2020-21 cost-reduction target in JLR and better-than-expected demand tailwind for Defender’’, analysts at Edelweiss Securities said in a note.
