Increasing pessimism towards Indian equities ? sparked by the recent liquidity tightening measures by RBI as well as continued weakness in the rupee ? pushed 30% of shares in the BSE 500 universe to 52-week lows in trade on Friday.
According to Bloomberg data, as many as 143 companies touched their 52-week lows on Friday as selling pressure from domestic institutional investors gathered steam. PSU banks and financial services companies were the worst hit, with 28 entities touching 52-week lows on Friday. The list included Syndicate Bank (-9.8%), Indian Bank (-7.6%), Union Bank(-7.5%), Canara Bank(-6.3%), Bank of Baroda (-5.5%), and Punjab National Bank (-3.7%), among others.
In the broader investment and finance space, JSW Holdings (-7.4%), IFCI (-5.6%), Tata Investment Corp (-3%), Power Finance Corp (-1.7%) and Rural Electrification Corp (-0.5%) touched their 52-week lows on Friday. Analysts say the RBI measures will have a negative impact on banks? liquidity, asset quality and margins. As a result, investors who had taken heavy exposure to these stocks over the past year in anticipation of easing interest rates are getting rid of such stocks.
According to separate data from Bloomberg, DIIs net sold R1,832 crore of Indian equities since July 15. At the same time, their foreign counterparts sold $411 million. Apart from banks, companies in the infrastructure, real estate and mining and metals sectors touched their new 52-week lows on Friday. These included DLF (-6.93%), Unitech (-4.40%), Oberoi Realty (-4.15%), GMR Infra (-5.22%), Jaypee Infratech (-5.18%), GVK Power & Infrastructure (-3.42%), L&T (-1.67%), Jindal Steel & Power (-7.29%) and Tata Steel (-3.74%).
Analysts say markets will continue to weaken, advising investors to avoid bottom-fishing in this highly volatile market. ?We do not recommend clients to invest in such (weak and volatile) a market… Never catch a falling knife,? said an institutional dealer at a US-based brokerage, requesting anonymity.
As the rupee breached the 61/$ mark on Friday, oil marketing companies (OMCs) traded at one-year lows even as they raised fuel price (petrol by R0.70 and diesel by R0.50) on Thursday.
Analysts say a weak currency increases the cost of import of crude oil for these companies and negates the hike in fuel prices. For state-owned OMCs, crude oil imports account for 70-80% of their total crude oil requisites. Chennai Petroleum (-10.6%), Bharat Petroleum (-4.7%) and Hindustan Petroleum (-3.7%) all touched 52-week lows on Friday.
Sensex declines further
The benchmark indices, meanwhile, continued their decline for the second consecutive week. On Friday, the benchmark Sensex lost 153 points, or 0.79%, to close at 19,164.02. The index has lost over 1,100 points in the last eight consecutive sessions, which is also the longest losing streak in over four months. The broader Nifty lost 50 points, or 0.87%, to close at 5,677.90. Both the benchmark indices lost nearly 3% during the week.
