India Insight

Markets this week: Sensex falls 2.6 percent, Jindal Steel slumps 9 percent

After rising for four consecutive weeks, the BSE Sensex fell 2.6 percent in the last five trading sessions, as a surprise repo rate hike by the Reserve Bank of India (RBI) on Sept. 20 dampened investor confidence and battered banking shares.

Rate-sensitive sectors were hurt — the banking index and the realty index lost over 7 percent in the week. YES Bank fell 14.5 percent, SBI lost 6 percent while shares of DLF slumped 13 percent.

While analysts expected the new RBI chief Raghuram Rajan to hold rates last week, expectations for monetary policy have suddenly shifted towards further tightening after the rate hike, a recent Reuters poll showed.

Here are the top losers and gainers of the week.

LOSERS

JINDAL STEEL AND POWER: The stock fell 9.2 percent this week, after rising for three consecutive weeks. Shares in Jindal Steel have struggled in 2013 and are down more than 47 percent.

JSPL’s stock has underperformed over the last one year on account of issues related to allocation of coal blocks. Selling has been further intensified due to subdued domestic steel demand and a decline in spot power realizations, IIFL said in a report on Sept. 27.

Banking stocks surge in September; analysts cautious

After falling for four consecutive months, India’s banking stocks have surged in September on value buying and recent measures announced by the new Reserve Bank of India chief, but analysts remain cautious.

On his first day in office, RBI chief Raghuram Rajan announced measures to prop up the rupee and liberalise the banking system, including higher overseas borrowing limits for lenders and simpler branch opening processes.

The BSE banking index has gained more than 14 percent this month after losing nearly 30 percent during the April-August period, with stocks such as ICICI jumping 20 percent and YES Bank climbing more than 27 percent. The benchmark Sensex has gained around 6.5 percent in September. However, analysts believe the rally could lose steam.

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