REUTERS - Markets were volatile during the truncated trading week due to geopolitical tensions, renewed uncertainty over the French presidential election and some stock-specific news back home.
The Nifty ended lower by 1.2 percent to close at 9,150 while the rupee stayed resilient to trade well below the 65 mark against the dollar.
Oil marketing companies BPCL and IOC were the top index gainers (up 10 percent) after they decided to change fuel prices daily. Adani Port was the top loser, down 10 percent after the Supreme Court ruled that the company cannot charge its customers more to cover a surge in the cost of imported coal.
Infosys lost about 7 percent after it provided conservative FY18 guidance. The company announced that it will return 130 billion rupees ($2 billion) to shareholders via a dividend or stock buyback and also announced a dividend of 14.75 rupees per share for FY17.
This works out to around 70 percent of annual free cash flow compared to 50 percent earlier. This is not seen as a good sign as it means the company has limited avenues left to deploy cash and is therefore looking at returning it to shareholders.
Adani Power and Tata Power corrected sharply after the Supreme Court set aside the ruling of an appeals tribunal that allowed these companies to charge higher tariffs to recover higher cost of imported coal.
SBI, Axis Bank and ICICI Bank have the highest exposure to the Mundra and Tiroda plants, which means NPAs could increase for these banks.
Automobile manufacturers were in the news for reportedly being saddled with huge unsold inventory (to the tune of 50-60 billion rupees) that are no longer compliant with the latest emission norms.
With such a huge amount of unsold stock, manufacturers are left with two options - export them or upgrade the vehicles to make them BS-IV compliant.Two-wheelers (around 6.7 lakh units) formed the bulk of the unsold inventory as a majority of sales come from rural markets where demonetisation hit the hardest.
The near-term headwinds for the alcoholic beverages sector are increasing each day. Madhya Pradesh recently became the fourth state after Kerala, Bihar and Tamil Nadu to impose a ban on liquor. Chhattisgarh is next in line.
The Supreme Court ban on liquor shops within 500 meters of national and state highways had already served a body blow to the industry, though there is an expectation that over time, it may not be strictly adhered to.
Meanwhile, the banking sector was in the limelight on reports that the government has formed a panel to review NPA resolution rules, including for mass public auction of collaterals against NPAs.
This is expected to be positive for the sector as it will help speed up NPA resolutions. However, we need to see how swiftly it is implemented.
On the macro data front, IIP declined 1.2 percent in February after a 3.3 percent growth in January, led by a dip in manufacturing. Headline inflation was along expected lines, increasing to a five-month high of 3.81 percent in March.
The coming week sees the results season gathering steam. Among large-cap companies, TCS, IndusInd Bank, Yes Bank, ACC, HDFC Bank, Ultratech Cement and Hindustan Zinc are expected to announce their results during the week.
DCB Bank, Reliance Infra, Persistent Systems, Rallis India, Hexaware, J&K Bank, Mindtree and Paper Products are some of the prominent mid-cap companies that will announce their numbers.
On the macro front, the government will announce WPI for March on Friday. It rose to 6.55 percent in February. Globally, China's IIP data for February is due on Monday and U.S. IIP data for March will be announced on Tuesday. The Fed's Beige Book will be released on Wednesday.
The Nifty is facing stiff resistance around the 9,250 mark. Headwinds in the form of geopolitical tensions, possible earnings disappointment and stretched valuations mean that markets could be ripe for an overdue correction.
I would continue to advise investors to be fairly liquid as a move below Nifty 9,000 can accelerate the fall.
(Ambareesh Baliga has about 25 years of experience in the stock market and has worked with Karvy and Kotak groups in the past. He is a regular market commentator on various business channels. He is a commerce graduate from Calcutta University and a qualified cost accountant.)