The market ended another week on a high note with support from foreign institutional buyers. Except for Thursday, it was a green closing on the remaining four trading days. Global cues also supported the rally.
The Sensex touched a high of 19,243 and the Nifty scaled 5,770 on Monday on the back of splendid industrial production numbers that were released on Saturday (12th September). The rally continued on Tuesday with the key barometers surging on buying interest in blue chip stocks. The next day was cautious with the market in a tight range, however, late buying led the indices close higher. The market ended its seven-day winning streak on Thursday following a rate hike by the Reserve Bank of India (RBI) in its mid-quarterly monetary review. The surge continued on Friday, after a day's break, with the Sensex touching a fresh 32-month high.
For the week ended 17th September, the key barometers were up 4% each with the Sensex and Nifty surging 795.09 and 244.90 points, respectively.
The top Sensex gainers in the week were DLF (up 9%), HDFC (up 8%), Reliance Industries (RIL), HDFC Bank (up 7% each) and ICICI Bank (up 6%). The losers were BHEL and Jindal Steel & Power (JSP) (down 1% each).
All sectoral ended in the green in the week under review with BSE Bankex and BSE Oil and Gas (up 6% each) while BSE Power (up 1%) was at the bottom of the list.
The Reserve Bank of India (RBI) on 16th September raised the short-term borrowing and lending rates in a bid to tame rising inflation. It hiked the repo (lending) rate by 25 basis points (bps) to 6% and the reverse repo (borrowing) rate by 50 bps to 5%.
The hike in rates, which came into to effect immediately, will lead to a rise in cost of funds for banks and eventually make loans expensive, which in turn will reduce consumption.
Food inflation touched 15.10% for the week ended 4th September. This figure, though not exactly comparable to the previous week's 11.47% because it is calculated on the new series with 2004-05 as the base year, justified the RBI move to raise its short term lending and borrowing rates at the monetary policy review today.
This is the third consecutive week when food inflation has shown an upward trend, after a brief period of moderation in July and first half of August.
Fuel inflation stood at 11.48% for the week under review under a new series, as against 12.71% in the previous week.
Exports grew by 22.5% to $16.64 billion in August compared to the same period last fiscal. Imports, too, jumped by 32.2% year-on-year to $29.7 billion in August, as per government data released earlier this week.
During April-August this fiscal, exports posted a growth rate of 28.6% to $85.27 billion on a year-on-year basis. Imports during the April-August period grew by 33.1% to $141.89 billion.
The country's trade deficit widened to $13.06 billion in August compared to the year-ago period. For the April-August 2010 period, the trade deficit was $56.62 billion.
Global financial regulators on Sunday agreed on new rules designed to strengthen bank finances and rein in excessive risk-taking to help prevent another crisis.
The new Basel III rules by the Basel Committee on Banking Supervision will require banks to raise the level of top-quality capital known as core Tier 1 to 7% of their risk-bearing assets by 2019 from the current limit of 2%.
The 7% capital ratio includes a 2.5% capital conservation buffer. It means that in a crisis situation, a bank will be allowed to let its capital ratio drop temporarily to as low as 4.5%.
The move is aimed to prevent repeat of the international credit crisis. The financial meltdown in 2007-2008 forced many governments in developed nations to bail out banks as allowing them to wind up could have brought down whole economies.
The market will continue to be influenced by global cues and institutional buying. Domestic triggers will also have a role to play in giving direction to the market.
Curb your excitement. This rally is for momentum chasers
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