Markets gain on RBI move, inflation data

weekly report

Markets advanced for the fourth straight week as investors cheered RBI's decision to cut the cash reserve ratio by 50 bps and on the back of aggressive buying from foreign institutional investors who have injected $1.54 billion this month so far. A negative food inflation also helped to boost confidence.

The Sensex ended up 495 points or 3% to 17,234. Nifty rallied 158 points 3% to end at 5,205.

The RBI in the third quarter review of Monetary Policy cut the Cash Reserve Ratio (CRR) by 50 bps to 5.5%. CRR cut will infuse Rs 32,000 crore into the system. However, repo and reverse repo have been kept unchanged at 8.5% and 7.5%, respectively. RBI has kept Inflating forecast unchanged at 7%. GDP forecast has been brought down to 7% from 7.6% earlier.

Food articles continued to witness deflation for the fourth week in a row for the seven-day period ended January 14. In fact, the rate of price fall acclerated to 1.03 per cent for the week compared to 0.42 per cent in the previous one as most food items like vegetables turned cheaper and due to base effect.

After a lacklustre trading session on MOnday, markets rose on Tuesday as the RBI announced a cut in CRR. Markets were shut on Thursday on account of Republic Day. Friday, the Sensex rose to a high of 17,258 before finally ending at 17,234.

BSE capital goods index has gained 5.6% to 10,360. Auto, IT, consumer durables and bankex were up 3-5% each. Meanwhile, the BSE realty index slipped marginally to 1,702.

Maruti Suzuki was the biggest gainer among Sensex stocks. Shares of Maruti rose 10% to Rs 1,208. From the auto pack, Tata Motors went up 9.5% and Mahindra & Mahindra added 6.3%, respectively.

Bharti Airtel, Larsen & Toubro, SBI and Sterlite have added 5% each this week.

RIL advanced 3% to Rs 818 in spite of reporting disappointing numbers in the quarter ended December 2011. The buyback offer limited the downslide. The company is going to buyback of Rs 10,440 crore worth of shares at up to Rs 870 a share. The share buyback programme will begin from February 1, 2012.

Meanwhile, Hero MotoCorp and Bajaj Auto ended down. Hero MotoCorp slumped 6.6% to Rs 1,822. Bajaj Auto ended down 1.2%. Among other losers were DLF, Jindal Steel, HDFC Bank and Coal India.

Shares of sugar companies were in limelight in noon deals after the government issued permits to mills to export 5,92,036 metric tons of the sweetener, reports suggest. Balrampur Chini soared 12.5% while Bajaj Hindusthan rallied 13% through the week.