Roller coaster week as volatility persists

Major news for the week:

Reserve Bank of India hikes key rates by 25 bps

Bajaj Auto June sales up 63% yoy

May exports grow 35% to $16.1 billion

Foreign Direct Investment in May up 5.6%

Food inflation softens to 12.92%



After two-week straight gains, the domestic indices took a pause to end this week lower. The indices were on a topsy-turvy ride, up one day and down another for the first four days of the week. Finally, the last day of the week, the indices ended on a negative note.

The Sensex hit a double century (up 200 points) on the first day of the week as oil & gas shares outperformed after the government hiked the fuel prices on Friday (June 25, 2010).

The index failed to extend its gains on the second day as the bolt from China and Europe comes to disrupt the markets, which worried investors about the global economic recovery.

On the third day, the Sensex surged again on the news that Europe's Central Bank unveiling a plan to lend $161 billion to banks for three months.

On the fourth day, the index fell again on concerns over the Chinese growth as China's Purchasing Manager's Index fell to 52.1 in June from 53.9 in May 2010, which was slow in pace for the second consecutive month.

The index witnessed a lacklustre session amid volatility on the last day of the week and ended marginally lower.

The positive news back home like food inflation easing to 12.9% for the week ended June 19, 2010, the exports surging for the seventh straight month in May 2010 at 35% to $16.1 billion and the imports growing by 38.5% to $27.4 billion had no soothing effect on the market sentiments.

The base rate system was mooted by the Reserve Bank of India (RBI) to bring about a transparency in the banking system, which has come into effect from July 1, 2010, replacing the earlier system. The interest on loans was charged on the basis of the prime-lending rate.

The RBI on Friday (July 02, 2010) after the market hours declared hike in the interest rates. It hiked repo rate and reverse repo rate by 25 basis points (bps) to 5.5% and 4% respectively; a move that would help to contain inflation.

The indices witnessed high volatility in the week. The Sensex swung 421 points and the Nifty 129 points. Wrapping the week, the Sensex shut at 17461, lower by 114 points or 0.65% while the Nifty closed 32 points down or 0.61% at 5237.

On the global front, all the major indices were worst hit on the looming worries over the global economic recovery, down more than 4%. The Shanghai Composite lost the most by 6.66% for in the week on the worries over the Chinese growth.

Out of the 13 sector indices on the BSE, seven closed in red, while the rest six ended in the green in the week. Among losers, BSE Metal was the worst hit, ended the week down by 3.36%, followed by BSE IT and BSE HC that were down by 1.60% and 1.07% respectively. Among gainers, BSE CD rose the most by 2.76%, followed by BSE Oil & Gas and BSE Power that gained by 1% each.

Among 'A' group stocks, the gainers were - Hindustan Petroleum Corporation Ltd (HPCL) was the top gainer, rose by 9.79%, followed by Mangalore Refinery & Petrochemicals Ltd (MRPL) that increased by 9.52% and Mphasis that gained by 5.86%. The losers were - MMTC slid the most by 7.48%, followed by REI Agro that fell by 7.13% and Sesa Goa that shed 6.48%.

The foreign institutional investors (FIIs) funds have bought equities worth of Rs956.8 crore in the seven trading sessions from June 25, 2010 to July 02, 2010 as per data from the stock exchanges, which had some impact on the Indian markets. The domestic institutional investors (DIIs) continued to be the net sellers by selling Rs114.7 crore worth of shares in this week.

The major trigger for the domestic markets is the quarterly results of India Incs, which will start kicking in from the second week of July 2010. This is the key event, which the investors may keep an eye on. The move of RBI's raising interest rates may keep the banking sector in focus. The Indian markets may continue to follow the path led by its global counterparts. The progress of the monsoon may also be closely watched. The flows from the FIIs have always been important in deciding the course of the markets.