7 up for market

Indian stocks had a mixed week with the Sensex ending the shortened week (the market were closed on Wednesday on account of Ram Navmi) marginally higher by 66 points. The week started with the market softening in the very start following the Reserve Bank of India (RBI) hiking the repo and reverse repo (25 basis points each; the repo and reverse rate were hiked to 5% and 3.5% respectively) and growing concerns from the 11-nation Euro zone—first over conflicting signals from the currency bloc on resolving Greece’s debt problems and second over Fitch Ratings lowering Portugal's sovereign credit outlook. Despite, the Indian indices did well to close at 17645, bouncing back from the week’s low of 17337, a change of 307 points or 1.77%. The Sensex made an about turn in the final hour of the expiry day and closed over 100 points higher. It also managed to end the week on a positive note with gains of 86 points on Friday.



The market did not show much activity earlier in the week and traded within a tight band. Though the continuous flushing of funds by the FIIs doubled with the good expiry helped the Indian markets to trade a bit in an active mode and swing by over 345 points or 2% in a week. This is the second consecutive week that markets have shown reasonable movement. At the end of the week, the Sensex and the Nifty managed to hold on the important levels—17600 for Sensex and 5250 for Nifty. Sensex surged marginally by 66 points (+0.38%), while the Nifty rose by 19 points (+0.36%).



The passage of US Heathcare Reform Bill brought a right pill for the Indian healthcare stocks, which jumped by 2.59%, the most among the BSE’ sector indices. The fast moving consumer goods (FMCG) scrips followed suit and closed 1.19% higher. RBI’s surprise rate hike acted as a dampener for interest rate-sensitive realty counter that declined the most for the week—by 4.05%—followed by TECk stocks that fell by 3.26%. The remaining sector indices ended with listless gains or losses. Out of 13 BSE sector indices, six ended in negative and seven in positive.



Among ‘A’ group stocks, Areva T&D surged the most with gains of over 12.52%, while stocks like Gujarat NRE Coke and Sintex Industries followed posted gains of 9.14% and 7.29% respectively. Among losers, NMDC fell the most, by 16.86%, and dipped below its follow-on public offering (FPO) issue price of Rs300; Shree Renuka Sugars and Rastriya Chemicals & Fertilisers (RCFT) declined by 7.9% and 7.34% respectively. FIIs remained the net buyers till Thursday and a second week in a row with the net investment of Rs1,149 crore, whereas mutual funds stood as the net seller to the tune of Rs360 crore.


The Nifty ended the week on a high note with the significant physiological 5300 level nearing; we suggest investors to remain cautious as markets are not trading at cheap valuations (current Sensex P/E of over 21 times) and we might see selling pressure owing to profit booking at higher levels in the coming period. The market awaits two important triggers in April— First, RBI’s quarterly monetary policy review on April 20, 2010. Despite the recent rate hike, the market observers expect one more surprise rate hike before the policy announcement, as RBI has recently signaled the tightening of the policy to control the spiraling inflation. Second, the Q4 earnings of India as well as FY2010 and FY2011 earnings guidance, which are expected to be downgraded on the back of rising interest rates in the coming period. However, as said in the last report, Indian market has become a slave of foreign money and is dancing on the tunes of the FII flows. Thus, the FII flows will be an important factor in deciding market fate in coming times.