Bears grip markets on tepid earnings, reforms uncertainty

Markets closed on a dismal note as tepid quarterly results from prominent companies weighed on the indices.

Meanwhile, lack of any advancement in reforms such as GST in the present Monsoon session of Parliament amid weak global cues dampened sentiment.

The Sensex ended 259 points lower at 28,112 and Nifty slipped 68 points to end at 8,522.

The broader markets ended in-line with the benchmark indices- BSE Midcap and Smallcap indices lost 0.6% each.

The market breadth ended negative, with 1,271 gainers and 1,587 losers on the BSE.

Market participants remained edgy as a firm US jobs data released yesterday raised fears of a rate hike by the Fed.

The initial claims for state unemployment benefits fell 26,000 to a seasonally adjusted 255,000 for the week ended July 18, the lowest level since November 1973.

Market view

"Nifty continues to maintain its consolidation in the range of 8500 – 8650 since the last 7 trading sessions. However, over the last two days, the breadth of the market has fallen down significantly.

Corporate results are also not helping the case for the current situation of the markets, as there are a lot of disappointments so far in many earnings reported," said Kunal Bothra, Head- Advisory, LKP Securities.

"I believe, that Monday’s session could be crucial, as a break and close below 8500 can lead to a short term correction. I believe the next crucial support can be in the range of 8250-8350 on spot Nifty, if such a breakdown occurs" he added.

Rupee

At 3:30 PM, the rupee is trading at 63.95 against the dollar down by 19 paise on the back of on persistent demand for the dollar from banks and importers on the back of higher greenback in the overseas market.

Result impact

Wipro posted a 4% rise in its net profit to Rs 2,187.8 crore when compared with the corresponding quarter in 2014-15

. The revenue at Rs 12,237 crore rose 10 %. On a sequential basis, net profit declined by 3.7% while revenue was largely flat when compared with Rs 12,142 crore in Q4 of FY15.

The stock lost 4%. GAIL reported a 32% slump in net profit for the quarter ended June 2015 on lower production and price realization.

The company reported a net profit of Rs 424.14 crore during the quarter as compared to Rs 621.44 crore during the same period last financial year (2014-15).

The stock shed over 2%. Lupin declined 3% after the company reported a 16 per cent year-on-year drop in its consolidated net profit for the quarter ended June.

Axis Bank shed 0.7% after the percentage of gross Non Performing Assets (NPA) inched up to 1.38% in June quarter from 1.34% in the same quarter a year ago.

However, it reported a 18.72% rise in net profit to Rs 1,978 crore in the April-June quarter as compared to Rs 1,666 crore in the same quarter of the previous financial year.

Stocks

On the sectoral front, all sectoral indices barring BSE Consumer Durables and FMCG indices ended in red and lost between 0.5-1.6%.

Rate sensitive stocks ended lower ahead of the RBI monetary policy as the insufficient monsoon and rise in inflation has dampened the possibility of a rate cut.

ICICI Bank, M&M, Tata Motors, SBI, Maruti Suzuki, Axis Bank, HDFC Bank and Bajaj Auto ended lower between 0.1-4%.

ICICI Bank and L&T were down 4% and 1.4% ahead of the quarterly results due next week. Shares of Reliance Industries ended 2% lower ahead of the quarterly results due today.

Metal shares declined across the board on weaker-than-expected data from China and the euro zone raised concerns about global growth.

The flash Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) dropped to 48.2, below economists' estimate for a reading of 49.7 and the lowest reading since April last year.

Vedanta, Tata Steel and Coal India have lost between 1-2%. IDFC moved higher by 2.5% after the company announced that IDFC bank has received bank license from the Reserve Bank of India (RBI). Consumer Durables rallied on hopes that GST Bill would be passed in the current monsoon session of parliament.

Consumer Duradles sector will be the biggest beneficiary of the GST. Rajesh Exports and Titan gained between 0.5-1.5%.

Global markets

Asian shares dropped sharply on Friday after a survey of Chinese manufacturing activity was weaker than expected, while US jobs data underpinned the dollar as it bolstered bets that the US Federal Reserve is on track to hike interest rates later this year.

China’s Shanghai Composite outperformed the peers and ended 15 higher on hopes of further stimulus by the Beijing central Bank.

Japan's Nikkei share average fell on Friday morning after dismal corporate earnings on Wall Street.

On the other hand, European shares shrugged off the weakness in the Asian peers with FTSE, CAC and DAX were up between 0.1-0.4%.