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Weekly Market Report: Market may struggle till 20,300 is crossed on the Sensex

Encouraging economic data from the domestic arena as well as from across the world along with gains in the broader markets helped the local bourses end the week with splendid gains, ending a three-week losing streak.

The market is likely to face some resistance till the 20,300 levels are breached on the Sensex. However, with the market recording gains this week, a bout of profit-taking is imminent. Besides, economic pointers from the global arena as well as developments on the domestic front will provide some direction to the market in the coming week.

Buying at lower levels after the previous week’s slide, coupled with positive global cues, helped the indices erase the losses suffered on Friday (26th November) and start the week in the green. Splendid gross domestic product (GDP) growth numbers for the September quarter, along with good performance by second-rung stocks, ensured that the market stayed in positive terrain on Tuesday. The market ended near the day’s high on Wednesday, boosted by the HSBC Purchase Managers’ Index (PMI) for November that recorded its fastest growth in six months, a sign that economic growth was in line with expectations.

While the key indices regained their crucial levels in early trade on Thursday, a minor sell-off in the morning session resulted in range-bound trading. However, the market ended with modest gains, in the green for the fourth straight day. With the Asian markets drifting lower after opening strong, the local market was jolted and traded with a high degree of choppiness on Friday. Unable to claw back, the market settled flat with a negative bias on the last trading day of the week.

The market ended the week with gains of 4%, erasing all the losses suffered in November. The Sensex surged 830.32 points to 19,966.93 and the Nifty gained 240.85 points to 5992.80 for the week. Overall, for the month of November it recorded a loss of 4% with the Sensex tumbling 834.38 points and the Nifty declining 254.85 points.

Tata Motors (up 13%), Jindal Steel & Power (up 11%), Cipla (up 9%), Hindalco Industries (up 8%) and State Bank of India (up 7%) were the top performers on the Sensex this week. On the other hand, Hero Honda (down 5%), Reliance Infrastructure and ACC (down 2% each) were the notable losers.

All sectoral indices ended in positive terrain during the week, with the BSE Realty (up 8%) and BSE Bankex (up 6%) on the top of the list, while BSE Fast Moving Consumer Goods and BSE Consumer Durables (up 3% each) ended at the bottom.

Driven by good performance of agriculture and manufacturing, the Indian economy grew by 8.9% in the second quarter of the current fiscal, up from 8.7% in the corresponding period a year ago.

The growth rate for the first quarter has also been revised upwards to 8.9% from the earlier 8.8%, taking the overall economic expansion during the first half (April-September) to 8.9%, up from 7.5% in the corresponding period a year ago.

The seasonally adjusted HSBC Purchasing Managers’ Index (PMI)—a headline index designed to measure the overall health of the manufacturing sector—posted 58.4 in November, up from the October reading of 57.2. The latest reading pointed to a marked expansion of the Indian manufacturing sector. The rate of growth accelerated for a second successive month and was above the long-run average for the series.

India’s merchandise exports grew by 21.3% to $18 billion in October over the corresponding period a year ago, raising hopes that the country may be able to achieve the $200 billion exports target set for the current fiscal year. Imports during the period grew by 6.8% to $27.68 billion, leaving a trade deficit of $9.72 billion, according to data from the ministry of commerce released during the week.

Food inflation fell to a four-month low at 8.6% for the week ended 20th November from 10.15% in the previous week, as prices of vegetables, wheat and pulses declined on increased output and arrival of kharif crop in the market. This is the seventh consecutive week of decline in the food inflation, as availability of food commodities has improved after the monsoon season.

In international news, the US jobs report for November 2010 trailed analysts’ expectations. Employers added only 39,000 jobs to non-farm payrolls against an expected rise of 1,44,000. This led to the unemployment rate rising by 9.8% last month.

China’s official Purchasing Manager’s Index (PMI) for November showed a seventh successive month of manufacturing expansion, while the unofficial HSBC Markit index also grew at the strongest pace in eight months. The robust Chinese figures suggest that demand is continuing to rise, despite Beijing’s moves to slow the economy by hiking interest rates and increasing the level of reserves that banks are required to hold as a way of discouraging lending. 

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