Sensex snaps five-week rally

Major news for the week:

Food inflation eases to 16.24%

Securities & Exchange Board India sees no foreign institutional investor inflow reversal

India fertiliser demand seen at record high

Foreign banks set to play bigger role

August trade deficit widens to a 23-month high



Weekly report

Bulls took a pause after strong run as the Indian markets broke its five-week winning streak. The markets consolidated after a recent sharp rally and fell as investor booked profits. During the week, the domestic markets ignored positive triggers like continuous pumping of foreign funds and India's food inflation softening to 16.24% for the week ended September 25, 2010 as compared to 16.44% seen in the previous week. The global markets were also supportive but that failed to lift the Indian bourses. The domestic markets were down in three out of five sessions of the week. The BSE Mid-cap (up 1.42%) and BSE Small-cap (up 1.05%) outperformed the Sensex.

The Sensex swung by 561 points and the Nifty by 156 points during the week. On its way, the Nifty crossed 6200 levels, however, it failed to sustain those levels at the close. Wrapping the week, the Sensex shut lower by 195 points or 0.95%, at 20250 and the Nifty closed down by 40 points or 0.65% at 6103.

On the global front, the Sensex underperformed its global counterparts. The Sensex was the only index that ended the week in the negative terrain, down by 0.95%. On the other hand, Shanghai Composite surged the most for the second straight week, up by 3.13%. However, Shanghai index was shut for most part of the week. Hang Seng and CAC 40 ended the week with gains of over 2% each.

Looking into sectors, out of the 13 sectoral indices on the BSE, six rallied while seven posted losses. BSE Health Care (HC) was the top gainer, up by 3.25%, followed by the BSE Oil & Gas that surged by 1.91%. On the other hand, BSE Fast Moving Consumer Goods (FMCG) lost the most by 3.13%, followed by BSE Capital Goods (CG) that declined by 1.08%.

Among 'A' group stocks, Indiabulls Financial Services topped the gainers’ chart, rose by 26.84%, followed by Bhushan Steel that surged by 14.92% and Biocon gained by 12.68%. On the flip side, Tata Steel slid by 6.11%, followed by Shree Renuka Sugars that fell by 5.77% and Indraprastha Gas that declined by 5.67%.

The foreign institutional investors (FIIs) continued their buying trend in this week, as they bought Indian shares worth a net of Rs8,839.40 crore as compared to net buy of Rs8,297 crore seen in the previous week. The domestic investors sold the Indian stocks worth a net of Rs1,100.90 crore as against net sell of Rs1,179 crore seen in the previous week.

In the upcoming week, second quarter results of FY2011 will start flowing in and that may decide the course of the domestic markets in the near-term. The stock specific action will be seen in Exide Industries, Axis Bank, LIC housing Corporation and IT bellwether Infosys Technologies, as the companies will declare their Q2 results in the next week. On the macro economic data front, index of industrial production data and monthly inflation numbers will be released, which may also have some impact on the domestic markets. The developments in the external environment and foreign fund flows will also play a vital role in determining the movement of the domestic markets.