Market scales 2-1/2-year high on strong Q1 results, FII buying

Stocks scaled 29-month highs, helped by sustained foreign fund buying, strong macroeconomic scenario backed by revival in monsoon and decent first quarterly earnings so far. The market gained in 3 out of five trading sessions in the week ended Friday, 23 July 2010.



The BSE Sensex rose 175.16 points or 0.98% to 18130.98 in the week ended Friday, 23 July 2010, its highest closing level since 6 February 2008. The S&P CNX Nifty gained 55.20 points or 1.02% to 5,449.10, its highest closing level since 5 February 2008.

The BSE Mid-Cap index rose 0.48%. The BSE Small-Cap index fell 0.04%. Both the indices underperformed the Sensex.

As per a UN report released on 22 July 2010, India climbed four notches to be ranked the ninth most attractive investment destination in 2009 with a total foreign direct investment inflow of $34.61 billion. The World Investment Report-2010, prepared by the United Nations Conference on Trade and Development (Unctad) said that India attracted sizeable overseas investment despite the overall drop in such inflows due to the global financial crisis.

The Prime Minister's Economic Advisory Panel on Friday, 23 July 2010, forecast 8.5% growth in GDP in the fiscal year that ends in March 2011 (FY 2011). It expects 4.5% growth in farm output in FY 2011. The headline inflation will be at 6.5% by March 2011, the panel said in a report. The report also said net capital inflows would be $73 billion.

Prime Minister's Economic Advisory Council C. Rangarajan said fertiliser subsidy bill must come down and diesel prices could be freed once inflation begins to come down.

The Reserve Bank of India (RBI) said on Thursday, 22 July 2010, it will allow take-out financing through external commercial borrowing for refinancing of rupee loans availed from domestic banks. Refinancing of domestic rupee loans with external commercial borrowings is not permitted, Reserve Bank of India said.

The key near term event is the Reserve Bank of India's quarterly policy review on Tuesday, 27 July 2010. Analysts expect another 25 basis points rate hike aimed at anchoring inflation expectations. The Reserve Bank of India (RBI) on 2 July 2010, hiked the repo rate by 25 basis points to 5.5% from 5.25%, with immediate effect. It also hiked the reverse repo rate, at which it absorbs excess cash from the banking system, by an equal 25 basis points to 4% from 3.75%. The central bank said the latest rate hike was a part of the calibrated exit from the expansionary monetary policy.