Sensex sheds 145 points; rupee weakens to one-week low

A build-up in tension linked to geopolitical developments gave the Indian markets the blues yesterday as the Sensex lost 145 points at 29,643 while domestic investors sat tight ahead of start of the corporate earnings season.After starting higher, the 30-share Sensex slipped into negative territory before settling down 144.87 points, or 0.49% at 29,643.48. The gauge had bounced 213 points in the previous session. The 50-issue NSE Nifty ended lower by 33.55 points, or 0.36%, at 9,203.45 after cracking below 9,200.Sentiment soured over rising military heat in the Middle East and the Korean peninsula following last week’s US strike against Syria and sabre-rattling by the US and North Korea, which pushed investors to safer assets like gold, treasuries and the yen.The rupee weakness against the dollar fed negative mood. Caution also prevailed ahead of the March quarterly earnings with IT behemoth Infosys set to unveil its numbers today.Extending the previous day’s sharp losses, Adani Power yesterday fell 9.01%. However, Tata Power after moving both ways ended 0.06% higher. In the previous session, they had crashed by up to 16%. Foreign funds net sold Rs750 crore on Tuesday, as per provisional figures.The hardest hit is Tata Steel, which fell 2.12%. Others that lost heavily include Adani Ports, Wipro, GAIL and Tata Motors.Of the 30-share Sensex pack, 20 ended lower while 10 gained. BSE consumer durables slipped 1.01%, along with power, metal and PSU indices.Market breadth turned negative as 1,756 shares ended lower, 1,144 closed higher while 136 ruled steady. The total turnover on BSE hit Rs4,129.54 crore, higher than Rs3,613.98 crore during the previous session.Meanwhile the rupee closed at a one-week low against the US dollar after local equity markets fell ahead of the key macro-economic data.The home currency closed at 64.67, a level last seen on April 5, down 0.27% from its Tuesday’s close of 64.50. The rupee opened at 64.62 a dollar and touched a low of 64.74.The government will issue Index of Industrial Production (IIP) and Consumer Price Index-based (CPI) inflation for February and March, respectively. So far this year, the rupee has gained 5.3%, while foreign institutional investors have bought $6.81bn and $6.30bn from local equity and debt markets, respectively.The 10-year bond yield closed at 6.782% compared to its previous close of 6.81%. Bond yields and prices move in opposite directions.Asian currencies were trading higher. South Korean won was up 0.38%, Taiwan dollar 0.35%, Philippines peso 0.21%, Thai Baht 0.19%, Singapore dollar 0.11%, Malaysian ringgit 0.11%, Indonesian rupiah 0.05%.Stock rally hinges on corporate profitsBloomberg/MumbaiThe fate of India’s world-beating stock market rally hinges on a routine event: earnings season.Equities are trading near record levels in Mumbai, bolstered by bets that a state election victory will embolden Prime Minister Narendra Modi to push ahead with his reform agenda. Valuations rose to the highest level since 2010 at the end of March and the S&P BSE Sensex index is the top-performing gauge this year among the world’s 10 biggest stock markets.The gap between share prices and company profits has widened since 2014 on expectations economic growth will filter into bottom lines. That hasn’t happened consistently – while India’s GDP expanded 7% or more in each of the last four quarters, Sensex profits fell in two of those periods amid a tepid investment climate and rising bad loans.“The return expectations have to moderate,” said Mahesh Patil, who helps manage about $30bn in assets as co-chief investment of Birla Sunlife Asset Management Co “If expectations are more realistic, the market should be able to deliver that in the medium term.”Earnings season kicks off today, when software developer Infosys is scheduled to report. Company results will show performance during the first full quarter since Modi ordered a recall of high-value currency notes in November in a bid to reduce graft.Sensex members will post a 9.1% increase in net incomes for the three months ended March, helped by higher commodity prices, Deutsche Bank said last week. That would be the biggest quarterly climb in a year, data compiled by Bloomberg show. Birla’s Patil expects profits to recover only in the second half of the year that began April 1. Better rains, along with government programmes and reforms, will help boost economic growth in rural India, he said. Patil said he is bullish on financials, including mortgage lenders, and consumer discretionary companies.Morgan Stanley sees a similar trajectory for earnings, albeit over a longer time horizon.