But buy only on declines

The market closed the week with smart gains, mainly on institutional support and firm cues from the global arena. It had a negative bias at the close of the first day of the week, but climbed up and stayed positive on the other four days. The gains kept increasing, with the maximum registered on the last two days. The four-day rally and strong close changes the picture from a range-bound market to an uptrending market with the promise of further gains. The Nifty will now target 5,800 and the Sensex 19,400.

The market clocked gains of over 5% in the week (the best weekly gains since July 2009) with the Sensex closing on Friday at 18,816 and the Nifty at 5,654, their best closing levels since 27th January this year. The Sensex added a whopping 937 points and the Nifty jumped 281 points over the week.

The top Sensex gainers were DLF (up 13%), Jaiprakash Associates (up 10%), ICICI Bank, BHEL (up 9% each) and Infosys Technologies (up 7%). There were no losers this week.

All sectoral gauges ended positive with the BSE Realty index (up 9%) and BSE Bankex (up 6%) the top gainers.

The current four-day rally (22nd March to 25th March) has added 977 points on the Sensex and 289 points on the Nifty. The rally has surpassed the three-day budget rally (28th February to 3rd March) when the Sensex gained 789 points and the Nifty 233 points.

Going forwards there are tremendous headwinds like spiralling crude prices and inflationary pressures and the market will not run away at this stage. Besides, the next big trigger for the domestic market is the upcoming earnings season. Any entry into the market and specific stocks must be on the dips.

In economic news, food inflation was back in double digits at 10.05% for the week ended 12th March after a fortnight-long gap. Food inflation, which has been showing a declining trend for the last three weeks, stood at 9.42% in the week ended 5th March. In the corresponding week of the previous year, it was more than double, at 20.62%, as per government data.

The rate of price rise in food items, which accounts for over 14% of overall inflation, may prompt the Reserve Bank of India (RBI) to hike key policy rates. The central bank has already hiked its key policy rates eight times since March 2010. The last hike was taken at its mid-quarterly review on 17th March. Headline inflation, which has been above 8% since March 2010, was at 8.31% in February 2011.

The Centre has extended the ban on exports of pulses for another year, till March 2012, even as the country is likely to import 3.4 million tonnes of the vital foodgrain item to match the enhanced demand.

Production of pulses during 2011-12, as per the Second Advance Estimates of the agriculture ministry is put at 16.51 million tonnes. On the other hand, the Planning Commission has estimated the demand for pulses during the next fiscal at 19.11 million tonnes.

In one of the shortest Budget sessions in recent times, the government managed to clear the Finance Bill for 2011 with some modifications. Finance minister Pranab Mukherjee rolled back the 5% service tax on healthcare and also modified tax proposals relating to ready-made garments, dividend tax, personal computers, printers, mobile phones and auto parts. The government also tabled a Bill to raise the voting rights of shareholders of nationalised banks to 10% from the existing 1%.

India's foreign exchange reserves for the week ended 17th March surged by $1.67 billion to $303.51 billion, helped by a healthy increase in foreign currency assets (FCAs). The reserves had declined by $755 million to $301.84 billion in the previous week.

FCAs, which include the effect of appreciation or depreciation of non-US currencies such as the euro, pound and yen held in reserves, went up by $1.47 billion to $273.72 billion for the week under review, according to RBI data. India's gold reserves were unchanged at $22.14 billion at the end of the reporting week, the central bank said.

On the international front, the ongoing turmoil in West Asia has now spread to Syria. Government troops opened fire on protesters in cities across Syria and pro- and anti-government crowds clashed in Damascus, as one of the Mideast's most repressive regimes sought to put down demonstrations that exploded nationwide, demanding reform.

Also, Bahrain's security forces fired tear gas at anti-government protesters in the Gulf kingdom on Friday after a prominent Shiite cleric vowed that their demands for the Sunni monarchy to loosen its grip on power will not be silenced by "brutal force".

Portuguese prime minister Jose Socrates resigned earlier this week after the country's Parliament rejected the minority government's austerity measures. The move is likely to be a setback to the European Union's initiatives to take the region out of the debt crisis.