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Equities fall for third week as QE worries mount

Despite gaining more than 2% earlier in the week, Indian equities posted their third weekly decline

Despite gaining more than 2% earlier in the week, Indian equities posted their third weekly decline as local investors took money off the table, fearing the US Federal Reserve might taper its monthly bond purchases of $85 billion earlier than anticipated.

The drop in the preliminary reading on the November China manufacturing PMI to 50.4, the first fall in four months, also spooked Indian investors.

Falling for the third consecutive session, the Sensex ended down 11.66 points, or 0.06%, on Friday and closed at 20,217.39. The Nifty, too, ended 0.06% or 3.6 points lower at 5,995.45. For the week, Sensex ended down nearly 1% whereas the 50-share Nifty lost 1% on concerns of tightening liquidity in global markets.

According to provisional data from stock exchanges, FIIs sold $0.45 million of Indian shares on Friday ? the second consecutive session of selling by overseas investors after having purchased $3.85 billion of Indian shares in the previous 35 straight sessions.

However, market experts said selling by domestic institutional investors (DIIs) put additional downward pressure on the markets. On Friday, DIIs sold R252.45 crore of Indian shares, taking the month-to-date tally to nearly R8,200 crore ($1.3 billion).

In one section of the Open Market Committee?s October 29-30 gathering, Fed officials signalled they may taper bond buying ?in coming months? if the economy improves as expected.

Policymakers ?generally expected that the data would prove consistent with the committee?s outlook for ongoing improvement in labour market conditions and would thus warrant trimming the pace of purchases in coming months… Many members stressed the data-dependent nature of the current asset purchase programme, and some pointed out that, if economic conditions warranted, the committee could decide to slow the pace of purchases at one of its next few meetings?, stated the Fed minutes.

The fall in equities weighed on rupee too, which ended at a one-week low of 62.885/$.

Consumer companies ? durables and staples ? were among the biggest losers this week as concerns over a slowdown in volume growth after the festive season, coupled with high valuations, triggered sectorwide profit booking. The BSE Consumer Durables index lost 2.3%, while BSE FMCG index declined nearly 1.5% to drop to its lowest levels in nearly three months.

Bank Nifty fell 1.3%, led by decline in ICICI Bank (-2.7%) and Canara Bank (-5%). BSE Auto and BSE Healthcare indices ended down nearly 2% each.

Oher losers included Sesa Sterlite (-8.7%), Bajaj Auto (-6.8%), Cipla (-4.8%), Sun Pharma (-4.07%), and Hero MotoCorp (-3.43%). Data suggest 18 out of 30 Sensex companies ended in the red.

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First published on: 23-11-2013 at 04:34 IST
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