Headed nowhere: Weekly Market Report

Nifty is an indecisive phase

Positive cues from the global arena and higher economic indicators helped the share market close higher in the week. However, cautiousness prevailed ahead of the earnings season, which is expected to come in subdued, due to higher costs and interest rates. Besides, the Reserve Bank of India’s (RBI) policy review will also be keenly watched.

The market closed the week with a gain of 3%, up from a 2% decline in the last week of December. The Sensex gained 413 points to settle at 15,868 and the Nifty closed the week at 4,754, up 130 points. The Nifty is an indecisive phase, with the events of next week giving it a direction.

The stock market started the New Year on a buoyant note following the Indian government’s announcement to allow qualified foreign investor (QFIs) to invest directly in the Indian stock market, a move which will help in attracting more foreign funds. Across-the-board buying by institutional investors helped the market log gains for the second day in a row on Tuesday. On Wednesday, the market snapped its two-day winning streak on mixed global cues, which resulted in a high degree of volatility. A setback in the PSU disinvestment process also weighed on the investors.

The market closed unchanged on Thursday even as the food inflation for the week ended 24th December turned negative as a weak opening of the European bourses saw the indices giving up their gain in the second half of trade.  The market closed flat with a positive bias on Friday on buying support in select blue-chips like Reliance Industries and Reliance ADAG stocks.

Among the sectoral indices, BSE Bankex and BSE Capital Goods closed with gains of 6% each while BSE Auto and BSE Fast Moving Consumer Goods settled unchanged.

Tata Motors (up 14%), ICICI Bank (up 10%), Larsen & Toubro, Tata Steel (up 8%) and HDFC Bank (up 6%) were the top Sensex gainers. The key losers on the index were Hero MotoCorp (down 9%), Bajaj Auto (down 8%), DLF (down 5%), Mahindra & Mahindra and Bharti Airtel (down 4% each).

The key gainers on the Nifty were Tata Motors (up 14%), Reliance Infrastructure, Reliance Communications (up 11% each), ICICI Bank (up 10%) and L&T (up 9%). The losers were led by Hero MotoCorp (down 9%), Bajaj Auto (down 8%), DLF (down 5%), M&M and Bharti Airtel (down 4% each).

Manufacturing activity posted its best growth in six months at 54.2 in December, as per the HSBC Purchasing Managers’ Index (PMI). Commenting on the growth, Leif Eskesen, chief economist for India & ASEAN at HSBC said, “Manufacturing activity rebounded in December led by higher demand from both domestic and foreign clients, suggesting that the momentum in the sector is not quite as weak as official and more dated industrial output data would suggest.”

Food inflation entered the negative zone at (-) 3.36% for the week ended 24th December. This is the first time in almost six years, for which data with base year 2004-05 is available, that food inflation has shown a decline on an annual basis. With improvement in food price situation, the Prime Minister's Economic Advisory Council has favoured rate cuts by the RBI and hopes headline inflation, too, will fall below the projected 7% by March-end.

On the international front, developments in Europe, economic data from the US and the beginning of the earnings season will dominate the global markets next week. The meeting of French and German leaders on Monday will be closely watched. The US retail sales data, weekly jobless claims and consumer sentiment are due next week, but stocks will get direction from the earnings reports.

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