Day 4 of weakness: HUL, ITC drag Nifty below 200-DMA

iifl29th July, 2013 : Comments by Amar Ambani, Head of Research, India Infoline 


Day 4 of weakness: HUL, ITC drag Nifty below 200-DMA

 The benchmark indices extended their losing streak to the fourth straight trading session on Monday. So intense was the selling pressure that the Nifty very swiftly violated its critical 200 Daily Moving Average. The latter is a technical indicator, which shows the security’s closing prices throughout 200 consecutive trading days. Traders use this Moving Average to determine the market’s long-term direction.

For a change, the fall was led by defensive stocks like Hindustan Unilever and ITC. HUL fell sharply after sales volumes declined for the fifth consecutive quarter. The company said the slowdown in growth may last until the end of the current fiscal.

ITC continued to remain under pressure post its Q1 FY14 results on July 25. The stock fell 3.8% in trade today.

Interest rate sensitives continued to remain under pressure with the BSE banking and realty indices falling 1.8% and 1.2%, respectively. Even the midcap and smallcap indices declined by 1.2% and 1%, respectively. The only saving grace was the IT (up 0.65%) and auto indices (up 0.52%).

IT major Wipro surged 7% to close at Rs. 409 after the company announced upbeat revenue guidance for Q2 FY14. The company announced its results post market hours on Friday.

Market sentiment took a further hit after Chinese industrial profits rose 6.3% in June year-on-year. The increase marked a sharp slowdown from a 15.5% rise in profits in May.

The Sensex closed Monday at 19,593, down 155 points, while the Nifty ended at 5,832, down 55 points, over Friday’s close.

The advance-decline ratio favoured the bears. On the Bombay Stock Exchange, 1,400 stocks declined against 831 advances, while 150 stocks remained unchanged.

Volatility, as measured by India VIX, shot up by 8.7% at 18.25. It hit a day’s high of 18.42 and low of 16.78.

IDFC, JP Associates, Hindalco, Ambuja Cements, Sesa Goa, Hindustan Unilever, BPCL and Coal India lost out while Jindal Steel, Tata Motors, UltraTech Cement, Grasim Industries, Asian Paints, Sun Pharmaceutical, Hero MotoCorp and M&M gained.

In earnings, NTPC will declare its Q1 FY14 numbers on Tuesday. Amar Ambani, Head of Research at IIFL, sees NTPC posting a net sales of Rs. 167.66bn, a gain of 5.1% year-on-year. On the operating profit margin front, Ambani sees a 54 bps YoY rise at 23.3%. He forecasts a 7.9% YoY growth in net profit at Rs. 26.95bn. A day ahead of its results, the stock ended up 0.67% at Rs. 142 per share. Volumes on the counter surged to 37.53 lakh as against its five-day average of 29.25 lakh.