FII buying drives market higher for fourth week

Strong momentum helped the key benchmark indices close above psychological levels last week as foreign investors bet on robust economic growth in India. Sensex crossed psychologically crucial 20,000 mark and the Nifty crossed 6000 mark. The market gained for three out of trading five sessions last week.



The BSE Sensex rose 450.43 points or 2.30% in the week ended Friday, 24 September 2010, to settle at 20,045.18. The S&P CNX Nifty jumped 133.35 points or 2.26% to 6,018.30.

The BSE Mid-Cap index rose 10.88 points or 0.13% to 8,115.16. The BSE Small-Cap index rose 28.42 points or 0.28% to 10,267.33. Both the indices underperformed the Sensex.

Foreign institutional investors (FIIs) are in a buying spree in India. FII inflow in September 2010, totaled Rs 17,499.43 crore (till 23 September 2010). FIIs had bought equities worth Rs 11,687.50 crore in August 2010. FII inflow in the calendar year 2010, totaled Rs 36994.53 crore (till 23 September 2010).

The government on 23 September 2010, doubled foreign investment limits in government securities to $10 billion from $5 billion and increased the limit for corporate bonds to $20 billion from $15 billion. It said that it believes the move will help to raise investment in bonds, infrastructure and develop bond markets in India at the same time as balancing its monetary policy.

At a mid-term policy review on 16 September 2010, the Reserve Bank of India (RBI) signaled that it may be nearing a pause in its current tightening cycle. The central bank said its rate and liquidity actions since October 2009 have been driven by two considerations -- normalisation of the monetary policy stance as the crisis abated and inflation management. The Reserve Bank of India believes that the tightening that has been carried out over this period has taken the monetary situation close to normal, it said. Consequently, the role of normalisation as a motivation for further actions is likely to be less important, the RBI said.

The RBI on 16 September 2010 raised its repo rate, or benchmark lending rate, by a quarter point to 6%, at a mid-term monetary policy review. The central bank also hiked the reverse repo rate, or the rate at which it borrows funds, by half a point to 5%. Both these changes will take place with immediate effect.

Cumulative rainfall in the country during 1 June to 22 September was 4% above normal, IMD data showed. Monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector. Monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector.

Trading for the week started on a rousing note. The key benchmark indices jumped on Monday, 20 September 2010, as foreign institutional investors' buying spree and higher Q2 advance tax payments from frontline companies underpinned sentiment. The BSE 30-share Sensex rose 311.35 points or 1.59% to 19,906.10. The S&P CNX Nifty rose 95.50 points or 1.62% to 5,980.45.

The key benchmark indices rose for the third straight day on Tuesday, 21 September 2010. Firm global stocks, foreign institutional investors' buying spree and robust Q2 advance tax payments from frontline companies boosted sentiment. The BSE 30-share Sensex rose 95.45 points or 0.48% to 20,001.55. The S&P CNX Nifty was up 28.60 points or 0.48% to 6,009.05.

The key benchmark indices took a breather on Wednesday, 22 September 2010, after a three-day winning streak with negative global cues playing the spoilsport. Investors took some cash off the table after the recent strong gains which saw indices scale their 32 month highs. The BSE 30-share Sensex fell 59.83 points or 0.3% to 19,941.72. The S&P CNX Nifty fell 18.05 points or 0.3% to 5,991.

The key benchmark indices skidded for the second straight day on Thursday, 23 September 2010, tracking subdued European markets after data suggested weak economic activity in that region. US index futures also declined ahead of the crucial economic data. The BSE 30-share Sensex fell 80.71 points or 0.4% to 19,861.01. The S&P CNX Nifty fell 31.45 points or 0.52% to 5,959.55.

The BSE benchmark Sensex surged to regain the magical 20,000 points level on Friday, 24 September 2010, as foreign funds continued to pump capital into domestic equities, bolstered by the government's move to relax certain foreign investment limits. The BSE Sensex rose 184.17 points or 0.93% to 20,045.18. Nifty rose 58.75 points or 0.99% to 6,018.30.

Among 30 Sensex shares, 25 rose and the rest declined last week.

FMCG company Hindustan Unilever was the top Sensex gainer last week. The stock rose 11.56% to Rs 314.65 on BSE.

Mortgage lender Housing Development Finance Corporation (HDFC) was the second biggest gainer in the Sensex. It rose 6.99% to Rs 731.95.

India's top car maker by sales Maruti Suzuki India was the third biggest gainer in the Sensex. It rose 6.78% to Rs 1481.05. The stock rose on reports a foreign broker upgraded the stock to 'buy' from 'underperform' and also raised its price target to Rs 1,720 from Rs 1,369 earlier.

Maruti Suzuki India's domestic sales rose 32.5% to 92,674 units in August 2010 over August 2009. But, the company's exports fell 18.4% to 12,117 units in August 2010 over August 2009. Maruti Suzuki's its total sales in August 2010 were the highest ever monthly sales.

Hero Honda Motors (up 6.55%), ITC (up 6.24%), Wipro (up 6.13%), Tata Power Company (up 5.01%) and Tata Steel (up 4%), were the other major Sensex gainers last week.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) declined 2.44% to Rs 1001.65. It was the top Sensex loser. Reports last week indicated RIL is in advanced talks with US-based Chesapeake Energy to buy a stake in Eagle Ford shale gas project in the US.

Steel maker Jindal Steel & Power slipped 2.28% to Rs 692.7. It was the second biggest Sensex loser.

Infrastructure developer Jaiprakash Associates fell 1.18% to Rs 121.2. It was the third biggest Sensex loser.

Copper maker Sterlite Industries (down 0.52%) and private sector lender ICICI Bank (down 0.30%), were the other Sensex losers.