Markets this week: BHEL is top Sensex loser
By Ankush Arora and Sankalp Phartiyal
The BSE Sensex had been headed for a week of gains until upbeat U.S. jobs data triggered fears of a soon-to-start tapering of the Fed’s monetary stimulus, pulling the benchmark down by a percent for the week ending Aug. 16. The broader Nifty slumped 4 percent on Friday, marking its biggest daily drop in almost two years.
The rupee also fell to a new record low of 62.03 versus the dollar on Friday despite the Reserve Bank of India (RBI) and the government’s continued efforts to prop up the currency.
New measures by the RBI to restrict how much Indian citizens and companies can invest abroad raised fears of outright capital controls that could spook foreign investors, hurting the rupee further.
The outlook remains bleak as Indian shares marked their fourth consecutive weekly fall, totalling a decline of 7.7 percent.
Here are the top five losers and gainers of the week:
BHEL: India’s top power equipment maker was the worst performing stock in the Sensex, with losses of nearly 10 percent for the week. The stock, which was downgraded to ‘sell’ by Deutsche Bank in the first week of August, touched its 52-week low of 104.75 rupees on Friday and closed 10.7 percent lower.
“Q1 numbers, which the company has declared a couple of weeks back, has added fuel to the fire because the numbers were very bad,” said S.P. Tulsian, an independent market analyst.
Of the 48 analysts covering BHEL stock, 30 have a ‘sell’ or equivalent rating, according to Thomson Reuters data.
TATA POWER: The utility company ended the week as one of the worst Sensex performers, down nearly 6 percent at 73.25 rupees. The Tata Group company has posted losses in the first quarter of the fiscal year, like other major infrastructure companies such as GVK, Lanco Infratech and Adani Power.
Its biggest domestic power plant at Mundra, located in Gujarat, has come under financial stress as a regulatory decision allowing it to pass on the rising costs of imported coal to customers has yet to be implemented.
“Increase in coal realization and compensatory tariff for Mundra are the key trigger for the stock, until then we expect the stock to languish at current levels. We resume coverage on Tata Power with a hold rating,” according to a report by IDBI Capital.
The stock has lost 33.6 percent of its value in 2013.
SBI missed estimates and on Monday posted a 13.6 percent drop in net profit to 32.41 billion rupees in the fiscal first quarter, compared with 37.52 billion rupees a year ago. An increase in distressed loans and the provisions to guard against them are also likely to eat into the profits of the state-run bank this financial year. The outlook for the rest of the fiscal year isn’t too bright either.
“I can’t see why financial 2014 should get better for SBI. Today, the asset quality pressures are huge, not for SBI alone, for the entire banking sector,” said ASV Krishnan, banking analyst for Ambit Capital. Macquarie recently cut SBI to ‘neutral’ from ‘outperform’, citing low growth and a weak rupee.
RELIANCE INDUSTRIES: Shares of the Mukesh Ambani-controlled energy firm fell 4.7 percent this week at 825.15 rupees. Of the 45 analysts covering the stock, 15 recommend ‘hold’ and 25 have a ‘buy’ or equivalent, according to Thomson Reuters data.
“There are no fresh triggers for the stock to really move ahead. The gas price hike is also going into a limbo, there’s no clarity. In fact, the stock has run up too much,” said Tulsian.
He recommends entering into Reliance below 800 rupees for investors with a long term horizon of at least 12 months.
MARUTI SUZUKI: Shares of India’s top carmaker ended down nearly 5 percent on Friday, taking their losses for the week to 4.4 percent. The stock, which ended in the red in three of four trading sessions this week, has lost 11 percent so far this year as compared with a 7 percent fall in the BSE auto index.
The dip in Maruti’s fortunes is reflective of a rough patch for the automobile industry as rising fuel costs and high interest rates keep demand subdued.
Of the 55 analysts covering the stock, 43 maintain a ‘buy’ or equivalent rating, Thomson Reuters data showed.
Tata Motors, India’s biggest truck and bus maker, ended the week as the best Sensex gainer, with gains of 12.5 percent. Tata Steel climbed 7.6 percent, followed by Hero MotoCorp, which rose 7.2 percent.