Nifty to see upmove to the level of 5,365, and then up to 5,400

The spectre of the government taxing FII investments through P-Notes kept the market low for most of the week, while clarifications on the issue by the finance minister late Thursday and on Friday lifted sentiments. Although the market closed flat with a positive bias, the market logged its first weekly gain in five weeks.

Economic concerns and the rupee hitting a fresh two-month low led the market lower on Monday. Clarification on the government’s proposed GAAR norms led the market higher on Tuesday. However, intense selling pressure in the second half of trade and weak global cues led the market lower on Wednesday.

Weak global cues and concerns over the new taxes proposed by the finance minister in the Budget, which would come into effect shortly, led the market marginally down on Thursday. However, clarifications by the finance minister over the proposed tax on FIIs led to a rally on Friday.

The Sensex gained 42 points to close the week at 17,404 and the Nifty moved 17 points up to 5,296. If the Nifty manages making higher high and stays above 5,290, we may see an upmove to the level of 5,365, and then up to 5,400.

Among the sectoral indices, BSE Healthcare and BSE Fast Moving Consumer Goods were up 2% each while BSE Power declined 2% and BSE Consumer Durables settled 1% lower.

The Sensex toppers in the week were Ranbaxy Laboratories (up 13%), Dr Reddy’s Laboratories (up 6%), Tata Steel (up 5%), Wipro and Kotak Mahindra Bank (up 3% each). Reliance Communications, Cairn India (down 6% each), NTPC (down 5%), Reliance Power (down 4%) and BHEL (down 3%) were the losers on the index.

The top gainers on the Nifty were Ranbaxy (up 13%), Dr Reddy’s (up 6%), Tata Steel (up 5%), Kotak Mahindra Bank (up 4%) and Wipro (up 3%). The major laggards were Reliance Communications, Cairn India (down 6% each), NTPC (down 5%), Reliance Power and BHEL (down 4% each).

Showing signs of recovery, the eight core infrastructure industries grew by 6.8% in February on account of healthy coal and power output, up from a dismal performance of 0.5% a month ago. The eight industries—crude oil, petroleum refinery products, natural gas, fertilisers, coal, electricity, cement and finished steel—have a weight of 37.90% in the overall Index of Industrial Production (IIP). Economists said if this growth rate is maintained for a few more months, it would improve the overall industry output.

Setting at rest the uncertainty about overseas investments, finance minister Pranab Mukherjee on Friday said that persons investing in stock markets through participatory notes (P-Notes) will not have to pay taxes in India, an assurance that pushed up the markets.

P-Notes are instruments that allow FIIs, which are not registered with market regulator Securities and Exchange Board of India (SEBI), to invest in the Indian equity market.

On the international front, Eurozone finance ministers on Friday agreed to raise the combined lending ceiling for their two bailout funds to 700 billion euros from 500 billion. The 700 billion will come from 500 billion euros of the permanent bailout fund, the European Stability Mechanism (ESM), and the 200 billion euros committed under existing bailout programs for Greece, Ireland and Portugal by the temporary European Financial Stability Facility (EFSF) fund.

US Federal Reserve chief Ben Bernanke’s that he would keep stimulating the economy in order to boost jobs led the US markets higher in the week.