Nifty, Sensex, may be headed for a rally: Weekly Market Report

Moneylife Digital Team 23 March 2013

If Nifty closes above 5,690 it may target 5,825

The Indian market closed in the negative for second week in a row, this time on political developments and concerns about further rate cuts raised by Reserve Bank of India (RBI) in its mid-quarter policy review earlier this week. The European Central Bank’s (ECB) threat to cut off emergency funds to Cypriot banks, after 25th March, if the beleaguered nation is unable to fulfil the conditions for an EU bailout, also weighed on the domestic market, keeping it down for all the trading sessions in the week. Trading volume will be lower next week on account of trading holidays on Wednesday and Friday.

The Sensex plunged 692 points (3.56%) to close the week at 18,736 and the Nifty finished at 5,651, a cut of 221 points (3.77%). The market is headed for a rally. If Nifty closes above 5,690 it may target 5,825.

The market settled in the negative on Monday as cautiousness prevailed a day ahead of the RBI’s policy review. The market closed in the red on Tuesday as political concerns after the DMK’s withdrawal of support to the ruling UPA-led government at the Centre overshadowed the RBI’s 25 basis point repo rate cut.

The benchmarks settled lower on Wednesday as the political logjam in Delhi ignited worries about inflows from foreigners and a slowdown in growth. The indices pared their gains in late trade and settled lower on Thursday on weak global cues on the Cyprus bailout issue. Political worries continued to trouble the market on Friday, leading it lower for the sixth day in a row.

While the BSE Fast Moving Consumer Goods index ended flat, all other sectoral indices settled lower. BSE Realty (down 13%) and BSE PSU (down 8%) were the top losers.

ITC (up 1%) was the lone gainer on the Sensex this week when the market plunged over 3.5%. BHEL, Tata Steel (down 9% each), State Bank of India (down 8%), ONGC and Maruti Suzuki (down 7%) each were the main losers.

Lupin (up 3%) and ITC (up 1%) led the Nifty higher while Reliance Infrastructure (down 18%), DLF (down 15%), Jaiprakash Associates (down 14%), Tata Steel and BHEL (down 9% each) were the main laggards on the benchmark.

The Reserve Bank of India (RBI) in its mid-quarter policy review on Tuesday, cut the repo rate by 25 basis points (bps) to 7.50% but kept the cash reserve ratio (CRR) unchanged at 4%. The cut in the repo rate for the second time in 2013 is seen as an attempt to spur growth.

Also on Tuesday, the Dravida Munnetra Kazhagam (DMK), an ally of the United Progressive Alliance (UPA) government at the Centre, withdrew its support to the government following differences over the Sri Lankan Tamils issue. The move rattled the market for the entire week.

A pan-India undercover investigation by online magazine Cobrapost has accused HDFC Bank, ICICI Bank and Axis Bank of running a vast, nation-wide money laundering racket. Cobrapost, which conducted a sting operation across various branches of the banks, claimed that bank employees are readily accepting black money from customers to convert them into white money as a standard practice.

In international news, Cypriot lawmakers endorsed capital controls and legislation to wind down banks as they scrambled to secure a European bailout and avert a financial collapse of the debt-stricken nation. The country’s parliament passed nine bills late Friday, after a day locked in talks between Cypriot and international officials in Nicosia.

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