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Profit Booking At Week’s End Led By Global Caution On French Polls

The probability of a Macron win is fairly priced in. Should the converse happen, we could see some correction.

(Source: Bloomberg)
(Source: Bloomberg)

The Indian markets saw a minor pullback on Friday, which led to the week ending with minor losses. The Nifty corrected about 0.5 percent, and this was despite contribution from the laggards this week. Banks such as ICICI Bank Ltd. and State Bank of India Ltd. led the list of gainers, but were counter-balanced by losses in heavyweights like Reliance Industries Ltd. and Larsen & Toubro Ltd.

The government notified the Banking Regulations (Amendment) Ordinance, which would give more teeth to the Reserve Bank of India to tackle the bad loan menace. Public sector bank stocks fell after the news, as there had been a short-covering led move which didn't see a follow up, and on expectations of short-term pain if the clean-up act is swift and decisive.

For the week, stock movements were dominated by ICICI Bank, which gained nearly 7 percent, followed closely by SBI and Bank of Baroda. Core profitability surprised positively for ICICI Bank, and if other public sector banks can follow suit, the next few months could be positive for the banking space.

Metal stocks gave way this week, led by weakness in crude and global metal prices. Hindalco Industries Ltd., Tata Steel Ltd. and midcap stocks like Vedanta Ltd. and Nalco Ltd. were amongst the top losers.

Broader market losers included stocks like Ujjivan Financial Services Ltd. which corrected 9 percent for the week after reporting a 65 percent drop in profit, as also Kesoram Industries Ltd., which corrected over 12 percent for the week after reporting a net loss of Rs 74 crore. Other stocks which lost ground over the week include Shilpi Cable, correcting 26 percent, Kitex correcting about 18 percent and Tata Communications, which corrected about 10 percent.

The markets could well have been quiet because of the uncertainty surrounding the French elections. The polls have suggested that Emmanuel Macron will win, but polls over the last 18 months have been far from accurate, and hence the markets would probably like to play safe. This was evident across global markets, with European markets also trading quiet in early trade. Keep in mind – after round one of the French elections, the probability of a Macron win has started getting priced in. Should the converse happen, we could see some correction on Monday and the week ahead.

Niraj Shah is Markets Editor at BloombergQuint.