Weekly Report: Markets have a blast

It was a truncated and yet a momentum-packed week for the bourses. While the indices have been steadily trending upwards, as vouched by the fact that we are at 31-month highs, the week-on-week returns in recent memory have hovered in the region of a percent each, interrupted by long periods of consolidation and bouts of profit-booking. But this week has been different, with the Sensex gaining a whopping 578 points or 3.1% to end at 18199 and Nifty surpassing and sustaining above the crucial mark of 5600 to close at 5640, higher by 161 points, bolstered by a positive set of cues from the global front. Our markets have gained on all four days of the week, with Friday being a Ramzan Id holiday, and six of the past seven trading sessions.

The US markets rose for seven of the past eight trading sessions, with the S&P 500 index breaking above its 100-day moving average on Thursday, as US data showed the world's largest economy did not appear to be falling back into recession. This has been a shortened week for Wall Street on account of the Labor Day holiday on Monday. And the Asian and European shares touched 4-month highs as positive US and Japanese economic data led investors on a bargain-hunting spree and a shift to riskier assets weighed on the yen.

Meanwhile, food inflation shot up to 11.47% for the week ended August 28, 2010 due to increase in prices of cereals and fruits and milk. Food inflation, as measured by the Wholesale Price Index (WPI), stood at 10.86% for the previous week ended August 21, 2010 and 15.14% during the corresponding week in 2009. The fuel index showed no change during the week, at 12.71%. On annual basis, cereals turned expensive by 5.07% and milk prices soared by 17.60% for the week under consideration.

Most economists do not expect the Reserve Bank of India (RBI) to raise monetary policy rates based on the food inflation numbers, but some expect a marginal increase of 25 basis point in policy rates in the monetary policy review scheduled on September 16.

The metals index shone bright, strengthening by 5.1% at 16131. LMEX – a gauge of six metals – is trading at four-month highs and the rub-off effect was seen on metal shares back home. Moreover, there has been a slew of stock-specific developments. Tata Steel, the country's largest producer, jumped by 9.8% at Rs 593 on news that it was looking for a buyer for its South African unit after agreeing to sell its Teesside operations in the UK and after having raised Rs 700 crore by selling its stake in two group companies via block deals. Hindalco strengthened by 6.8% at Rs 182 and Jindal Steel added 4.5% at Rs 714. Sterlite Industries, JSW Steel and Sail were the other significant gainers.

The banking index came a close second, strengthening by 4.1% at 12984. Banking shares were in limelight on hopes that huge infrastructure investment in the coming days will give a push to credit growth in the second half of 2010-11. SBI zoomed by 7.5% at Rs 2982, ICICI Bank gained 5.1% at Rs 1050 and HDFC Bank added 2.1% at Rs 2240. The midcap banking stocks also had their day under the sun, with IDBI Bank racing ahead by 8.9% at Rs 139, Federal Bank gaining 7.5% at Rs 372 and Canara Bank adding 5.9% at Rs 565.

On the BSE-Sensex space, Tata Steel soared by 9.8% to emerge as the leading gainer for the week. ACC jumped by 9.6% at Rs 980 and SBI added 7.5% at Rs 2982. Hindalco, Jaiprakash Associates and ICICI Bank were the other leading gainers. On the other hand, Reliance Infra weakened by 1.9% at Rs 1009, ITC shed 1% at Rs 162 and Cipla lost 0.2% at Rs 306.

In the midcap space, Britannia Industries soared by 17.1% at Rs 482, BASF India zoomed by 17% at Rs 610 and Godrej added 15.7% at Rs 244. Wockhardt, Gujarat Gas and Indian Metals added between 13% and 15% each. And the smallcap space saw the likes of Parekh Aluminex jumping by 58.9% at Rs 499, KRBL soaring by 43% at Rs 36, Heritage Foods gaining 26% at Rs 233 and Tata Coffee adding 25.3% at Rs 626.