FII flare up markets for fourth week

Major news for the week:

Government slashes duty refund rates for exports

SBI reduces credit offtake target to 18%

Food inflation inches up to 15.46%

Govt raises FII limit in G-Secs, corporate bonds

Financial Tech slips as SEBI rejects MCX plea



Weekly report

Bulls continued to haunt bears for the fourth consecutive week, as the domestic markets posted significant gains of over 2% mainly on the back of continuous inflows by foreign institutional investors (FIIs). The nation’s economic growth lured foreign investors to increase their holdings, which supported the markets to remain upward, with the Sensex and the Nifty crossing 20000 and 6000 levels respectively for the first time since January 17, 2008. The markets rose in three out of five trading sessions of the week. The markets ignored the negative news like nation’s food inflation rising to six-week high level at 15.46% for the week ended September 11, 2010 against 15.10% seen in the previous week.

During the week, the Sensex swung 660 points and the Nifty 152 points. On its way, the Sensex and the Nifty hit new 32-month high at 20089 and 6037 respectively. To close the week, the Sensex shut higher by 450 points or 2.30%, at 20045 and the Nifty ended at 6018, 133 points or 2.27% higher.

On the global front, the Sensex continued to outperform all the other major indices for the third week in a row by gaining 2.30%, as foreign funds continued to flow. Other major indices did not saw much change owing to persisting worries over global economic recovery. Japan’s Nikkei was the worst performer, down by 1.60% during the week.

All the 13 sectors performed well except BSE Oil & Gas and BSE Realty ended the week lower by 0.84% and 0.45% respectively. BSE Fast Moving Consumer Goods (FMCG) was the top performer, gained by 5.31%, followed by BSE Consumer Durables (CD) that grew by 2.67% and BSE Auto surged by 2.50% Rest of the sectors gained in the range of 0.99% to 2.29%.

Looking into 'A' group stocks, Punj Lloyd put up a good show by rising 12.14%, followed by Colgate-Palmolive that surged by 11.66% and Hindustan Unilever advanced by 11.56%. On the other hand, Financial Technologies was the worst performer, fell by 14.09% after Securities and Exchange Board of India rejects MCX-SX’s acquisition, followed by Godrej Consumer Products that declined by 10.11% and BEML slipped by 6.05%.

The FIIs have been the major participants to lift the domestic markets to new highs. The FIIs were the net buyers of the Indian stocks to the tune of Rs8,996.8 crore, substantially higher than Rs7,607.1 crore seen in the previous week. Domestic institutional investors (DIIs) continued to be the net sellers of the Indian stocks to the tune of Rs1,409.5 crore as compared to the net sale of Rs2,336.1 crore seen in the previous week.

In the upcoming week, auto and cement firms may remain in focus as the auto sales and cement dispatch numbers will start flowing in for the month of September. Global markets performance will also play a vital role in deciding the future course of the domestic markets. FIIs fund flows will continue to dictate the trend for the domestic markets. Most important event that is scheduled for the next week is verdict on Ayodhya issue (slated on September 28, 2010); this event may impact significantly to the domestic markets.