Weekly Market View: Weakness may continue

The market managed a flat closing with a positive bias on the first trading day of the week amid a highly volatile session. It ended marginally lower on Tuesday on weak economic data from Europe that was announced on Monday. Lower-than-expected existing home sales data from the US dragged the markets lower all over the world on Wednesday and India was no exception. Bargain-hunting towards the end of the session helped the indices settle with marginal gains on Thursday. The market went into a tailspin on Friday, ahead of Federal Reserve Ben Bernanke's at an annual symposium at Jackson Hole, Wyoming.

For the week ended 27th August, the Sensex was down 403 points (2%) at 17.998 and the Nifty was down 122 points (2%) at 5,408.

The top Sensex performers during the week were Oil & Natural Gas Corporation (up 5%), Bharti Airtel (up 2%), NTPC and State Bank of India (SBI) (up 1% each). The top Sensex losers were Jaiprakash Associates (down 9%), Reliance Infrastructure (R-Infra), Hindalco Industries, DLF (down 8% each) and Hero Honda Motors (down 7%).

The BSE Consumer Durables (CD) index was the lone gainer in the sectoral space during the week, up 1%. The sectoral losers on a weekly basis were BSE Realty index (down 9%) and BSE Metal (down 3%).

The government this week extended sops worth Rs1,052 crore to exporters, particularly for the labour-intensive textile, handicrafts and leather sectors, to help them see through the fragile economic recovery globally.

However, the Centre made it clear that the popular Duty Entitlement Pass Book (DEPB) scheme, which has been in vogue for over a decade, is being extended for the last time. The government also extended the zero-duty Export Promotion Capital Goods (EPCG) scheme by one year to 31 March 2012. The scheme, which was announced in August last year, was to expire on 31 March 2011.

Food inflation moderated for the second straight week in the week ended 14th August to 10.05% as vegetables turned cheaper, but analysts said price volatility will continue till October when fresh crops arrive in markets.

Inflation in food items dipped marginally from 10.35% in the previous week. It was 13.45% in the same period last year and had crossed 20% in December 2009.

Fuel inflation remained steady at 12.57%, as the recent hike in prices of petrol, diesel and other related products have already been accounted.

Overall inflation, as measured by the wholesale price index (WPI), fell to single-digits at 9.97% in July, after a gap of five months.


Key infrastructure industries registered a sluggish growth of 3.9% in July that experts say may come in the way of double-digit expansion in overall industrial output. The six core industries - crude oil, petroleum refinery products, coal, electricity, cement and finished steel - had registered a 3.6% growth in June this year. The growth rate was 3.2% in July 2009, data released by the commerce and industry ministry said.

The Cabinet approved the much-awaited Direct Tax Code (DTC) Bill, which is likely to be tabled in Parliament during the ongoing monsoon session and referred to a select committee of members of both the houses.

The bill proposes to raise the income tax exemption limit from the present Rs1.6 lakh to Rs2 lakh. It also seeks to remove surcharge and cesses on corporate tax, providing relief to business houses.

Ending months of wrangling between the treasury benches and the opposition, the Lok Sabha approved the 'Civil Liability for Nuclear Damages Bill' after the government dropped the contentious provision of "intent" in case of accidents.

The bill seeks to fix the liability cap on operators in case of accidents at Rs10,000 crore, instead of Rs1,500 crore proposed earlier.

On the international front, US Federal Reserve chief Ben Bernanke on Friday said that the central bank 'would do its best' to prevent the country from slipping back into a recession. He portrayed a scenario for continued expansion as households rebuild their savings, banks increase lending and companies become more willing to hire.

Meanwhile, the US Commerce Department lowered its estimate for gross domestic product in the second quarter to an annual pace of 1.6% from an initially reported 2.4%.

Back home, auto and SUV major Mahindra & Mahindra (M&M) earlier this week signed a memorandum of understanding (MoU) with South Korea-based Ssangyong Motor Company (SMC). The Indian major said that the signing of the MoU will be followed by "a detailed due diligence process and finalisation of definitive agreements."

The company, however, was tight-lipped on the sum that it had agreed to pay to emerge as the preferred bidder for the South Korean automaker, which has a debt of $640 million.

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