Next resistance for the Nifty at 5,250

The market settled on a positive note, making it the fourth weekly close in the green. Indications of the government shifting its focus towards growth induced institutional investors to pump in funds into local stocks, leading to gains. Besides, positive sentiments from the global arena also boosted investor confidence. The benchmarks logged gains of 3% in the holiday-shortened week, as the Indian market was closed on Thursday for the country’s Republic Day.

The market closed flat on Monday, as nervousness set in a day ahead of the Reserve Bank of India’s (RBI) quarterly policy review. The RBI’s move to boost liquidity through the 50 basis point (bp) cut in CRR helped the benchmarks close with gains of around 1.50% on Tuesday. Optimism after the central bank’s move and a positive trend in Asia helped the benchmarks settle higher on Wednesday. Resuming after a day’s break, the market closed in the green on Friday on institutional buying in blue-chips.

The Sensex gained 495 points to close the week at 17,234 and the Nifty stood at 5,205 on Friday, up 156 points. We may now see the Nifty moving up to the level of 5,250.

The BSE Capital Goods index (up 6%) and BSE TECk index (up 5%) were the top sectoral gainers while BSE Realty settled flat.

The Sensex toppers in the week were Maruti Suzuki, Bharti Airtel, Tata Motors (up 10% each), Larsen & Toubro (up 8%) and Mahindra & Mahindra (up 6%). Hero MotoCorp (down 7%), Bajaj Auto, DLF, Jindal Steel & Power and HDFC Bank (down 1% each) were the major losers on the index.

The Nifty was led by SAIL (up 15%), Sesa Goa (up 13%), Reliance Infrastructure, Maruti Suzuki (up 10% each) and Tata Motors (up 9%). The main laggards were Hero MotoCorp (down 7%), Ranbaxy Laboratories (down 5%), Bajaj Auto, HDFC Bank and DLF (down 1% each).

The RBI in its monetary policy review, cut the CRR—the amount of deposits banks keep with the central bank—by 50 bps to 5.50% from 6% earlier. The move will lead to an infusion of Rs32,000 crore into the system. However, analysts opined that the RBI’s move to keep interest rates unchanged indicates that policymakers are yet not comfortable with the inflation numbers. C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, said the RBI should resort to cutting interest rates only when there are definite signs of non-food inflation easing in the economy.

India’s food inflation remained in the negative zone for the fourth week in a row, at (-)1.03% for the week ended 14th January from (-)0.42 per cent in the previous week. Crisil Chief Economist D K Joshi said the fall in food inflation numbers will help keep headline inflation at moderate levels.

Reliance Industries, last Friday (21st January) announced a Rs10,440 crore buyback plan of up to 120 million fully paid-up equity shares of Rs10 each, at a price not exceeding Rs870 per equity share from the open market. However, analysts felt a 10% premium on the buyback price of Rs870 would not be attractive for the investors who had entered the scrip at much higher valuations.

On the international front, Fitch Ratings on Friday downgraded the sovereign credit ratings of Italy, Spain Belgium, Cyprus and Slovenia, indicating there is a one-in-two chance of further downgrades in the next two years. Fitch’s announcement follows a downgrade earlier this month by Standard & Poor's of nine euro zone countries, including Spain and Italy.

Meanwhile, the US gross domestic product (GDP) expanded at a 2.8% annual rate in the fourth quarter of 2011, the fastest pace in one-and-a-half years. However, analysts hinted at a slower growth in early 2012.