The Reserve Bank of India's (RBI) monetary policy review on Tuesday and the fresh stimulus announced by the US Federal Reserve on Wednesday took the key indices to new 34-month highs at the end of the holiday-shortened week. This apart, a slew of positive domestic economic indicators and institutional participation also helped the market rally.
The market, unfazed by the "technical glitches" at the Bombay Stock Exchange that halted trading for two-and-half hours on Monday, ended with smart gains on the day. The positive HSBC Markit Purchase Managers' Index numbers for October also supported the gains. The 25 basis point hike in short-term lending and borrowing rates by the RBI resulted in the market ending a tad lower on Tuesday.
It opened higher on Wednesday after factoring the RBI rate hike. Investors' optimism about the Fed's announcement spurred the indices to close with gains of over half a percent. The last trading day of Samvat 2066 saw the key barometers scale their new 34-month highs. Coal India's splendid debut performance on the bourses along with the easing of the weekly inflation figures and most of all, the new stimulus package announced by the Fed overnight, which includes purchase government bonds worth $600 billion over the next eight months, were the key triggers for the strong performance on Thursday.
The market closed the week with gains of 4%; the Sensex surged 861.23 points and the Nifty added 264.10 points. The top gainers on the Sensex were ACC (up 11%), State Bank of India (up 9%), ICICI Bank (up 9%), Hindalco Industries (up 8%) and Larsen & Toubro (up 7%). The key losers were Maruti Suzuki (down 3%), Hero Honda and Cipla (down 1% each).
The BSE Bankex (up 7%) and BSE Consumer Durables (up 6%) were the top sectoral gainers in the week. On the flip side, BSE Oil and Gas and BSE Power (down 2% each) were the losers.
Sliding for the third straight week, food inflation fell to 12.85% for the week ended 23rd October from 13.75% for the week ended 16th October. Experts said food inflation would soften further by November-end when kharif crops come to the market. Food inflation remained high in August and September as heavy monsoon caused a supply glut.
Continuing with its policy of modifying policy rates in small doses, the RBI on Tuesday raised the short-term lending and borrowing rates by 25 basis points (bps) while keeping the cash reserve ratio (CRR) and bank rate unchanged.
The central bank said that based on current growth and inflation trends, it believes that the likelihood of further rate actions in the immediate future is relatively low. This is the sixth time this year that the RBI has raised rates to tackle inflation and tighten home-loan rules to check a property-market rally.
India's exports grew by 23.2% in September, recording a two-year high of $18.02 billion, while faster import growth raised concerns over the country's widening trade gap. Imports grew even faster, by 26.1% to $27.14 billion in September.
During the April-September period this fiscal, exports increased by 28% to $103.64 billion compared to the corresponding period in the previous fiscal, according to official data released by the government.
Imports in the first half of the current fiscal stood at $166.4 billion, an increase of 29.9% year-on-year, translating into a massive trade gap of $62.83 billion in the April-September period. The trade deficit in September was $9.11 billion.
The HSBC Markit Purchase Managers' Index (PMI) for India, based on a survey of 500 companies, rose to 57.2 in October, from 55.1 in September and 57.2 in August. The rise indicates a robust growth in the country's manufacturing sector.
This was the 19th successive month where an increase in incoming new business was indicated. Whilst the rate of new order growth accelerated from September's 10-month low, it remained softer than the notably steep expansions recorded at the start of 2010, according to the HSBC PMI press release.
The US is still crawling through a recession and its citizens are unhappy that their president is squandering huge resources on a vacation
There's a groundswell of anger in the US over the high cost of Barack Obama's trip to India this weekend. The sentiment stems from reports that the president and his entourage of about 3,000 officials, business people and security personnel will spend an estimated $200 million a day when he visits India for four days, beginning Saturday.
Topping the list of critics is newly-elected Republican representative from Minnesota Michele Bachmann, who has called the cost of the upcoming presidential trip "over-the-top". In an interview to a television channel on Wednesday, following her victory in a hotly-contested re-election bid to the US Congress, she said, "We have never seen this sort of an entourage going with the president before. And I think this is an example of the massive overspending that we've seen-not just in the last two years, really in the last four."
There has been no independent confirmation of the expenditure figures, but the White House was quick to respond, saying that the figures cited have no basis in reality. "Due to security concerns, we are unable to outline details associated with security procedures and costs, but it's safe to say these numbers are wildly inflated," White House spokesperson Amy Brundage said in a statement.
Still, it's difficult to believe that the elaborate arrangements for the four-day visit will come cheap. Take the bomb-proof surface tunnel that is to be installed by US military engineers on the approach to Mani Bhavan, the Gandhi museum that the president will visit soon after he comes to Mumbai on Saturday. US security officials came up with the plan after inspecting the route to the museum and they felt that the area was too congested to monitor. The kilometer-long tunnel that will be large enough to let Obama's cavalcade drive through, will be put up in an hour.
Several officials from the White House and US security agencies have been in India for the past couple of weeks with helicopters, a ship and high-end security systems, preparing for the visit. While security is a major concern, Americans aren't convinced about the costs involved.
"Some people say that Obama does not get it. I say he gets it just fine. He just does not care. He has his pie and he will eat it with all the toppings he can get on it and to heck with anyone else," writes one reader to a website, in response to the report on the cost of the trip. "This man has had more vacations in his two years in office than I have had in my entire life. He does not care that US citizens are living in tents as long as he is not."
Bill Hammersley, another writer on the website disagreed with the criticism. "Every time I see this article the number of people grows and grows. It started out as 150 people and now it's 20 times that size. This is the kind of over exaggeration that makes us look so silly and ignorant."
At $200 million a day for the four-day stay, the total expenditure might not be anywhere near $1 billion, perhaps a lot less. But this is apparently a little too much for Americans working through a recession to digest. A large section of them are struggling without employment and factories are continuing to close down. Thousands have lost their houses since the financial crisis set off the economic slide in 2008.
Obama was elected exactly two years ago for the hope he gave the American people. With no significant improvement in the economic situation, the sense of hope has been replaced by frustration and fear which resulted in a dramatic vote against the president and his Democratic Party in mid-term elections this week. As Bill, one of several agitated Americans, wrote after returning from casting his vote: "I'm totally speechless when it comes to Obama and his clowns and the whole political mess. I can't express my anger and resentment anymore."
Signs of easing of the global economy brought about by various central banks boosted global markets today and India was no exception. The market picked up the festive fever and the Sensex finished at a new all-time closing high today.