Weekly report: Stocks zoom 5% in results week

Markets created a slice of history of their own, with the Sensex and Nifty crossing 25,000 and 7,400 levels, respectively

In a historic election, India gave its most decisive mandate to Gujarat Chief Minister Narendra Modi, since the one given to Rajiv Gandhi after Indira Gandhi’s assassination. The markets simultaneously created history, with the Sensex and Nifty crossing the 25,000 and 7,400 levels, respectively, as the elections gave the BJP its highest seat tally ever and sunk the Congress to its lowest in post-Independent India.

The Sensex finally ended the week at 24,121, stronger by 1,127 points or 4.9 per cent and the Nifty ended at 7,203, up 344 points. The Mid-cap Index ended at 7,765, higher by 309 points or 4.1 per cent and the Small-cap Index ended at 7,785, up 292 points or 3.8 per cent. All the sectoral indices ended the week in the green. The high-weightage banking index jumped by 1,273 points or eight per cent at 16,994.

The high-beta realty index closed at 1,605, up 185 points or 13 per cent.

The benchmark indices began the week with a bang on speculation the BJP-led National Democratic Alliance (NDA) will form the next government and Narendra Modi will be at the helm of affairs. The momentum continued on the next day, as the exit polls too predicted a similar outcome. There was an interlude for the next two sessions as the market participants awaited the outcome on Friday. The barometer index scaled a record high of 25,375 on Friday, as it became clear that the Modi tsunami had swept away the Congress, but gave way to caution: The Sensex closed at 24,121, up 216 points after hitting a record high of 25,375 during the course of the day and the Nifty settled at 7,203, up 79 points after making a new peak of 7,563.

Meanwhile, rating agency Fitch said the NDA must take steps for fiscal consolidation, create a low inflation climate and push for structural reforms. These steps are necessary to create a conducive atmosphere for a pick-up in investment and get back India’s economic growth on a higher sustainable path, Fitch added.

On the economic front, the WPI inflation eased to 5.2 per cent in April from 5.7 per cent in March, providing relief to a new government amid other deteriorating macroeconomic numbers such as retail inflation and industrial output.

Week ahead

The ‘hope rally’ catapulted the benchmark indices – Sensex and Nifty – to a 38 per cent and 40 per cent rally, respectively.

But the movement on the counting day, with the markets surrendering most of their intra-day gains suggest that the prolonged period of euphoria was reaching its end, at least for the time-being.

The realisation that the new government would be confronted with the enviable task of bringing the tottering economy back on track and meeting the burgeoning expectations of the country at large would have dampened what was a runaway rally till then. The markets would be keeping a close watch on Budget formation exercise, especially with regard to Modi’s ministerial choices for key economic portfolios such as Finance and Commerce.

Moreover, the forthcoming Budget would also be an opportunity for the new government to unveil its economic agenda for the nation and determine the immediate direction for the markets.

The movement of India VIX, which crashed 34 per cent to 24.3 on Friday after shooting up to a high of 37.1 on May 12, also suggests that we might be in line for a period of consolidation on the Dalal Street.

The Nifty call writing at the Nifty 7,200 and 7,500 levels also demonstrates that the Nifty is capped at those levels, at least for now. While the markets adopts a wait-and-watch approach in the immediate future, one would believe that we are at the cusp of a structural bull market and the levels of 8,000 on the Nifty seem doable by the end of the year.

Key stocks

The stellar performers of the week included Tata Power (up 12.4 per cent at Rs 90), Coal India (up 11.84 per cent at Rs 345) and GAIL (up 10.45 per cent at Rs 409). Index heavyweight and cigarette major ITC rose 3.48 per cent at Rs 357.

Oil and gas stocks had a phenomenal run. Index bellwether Reliance Industries (RIL) jumped 8.33 per cent to a yearly high of Rs 1,080 and ONGC surged 10.69 per cent to Rs 384.95. The stock hit a record high of Rs 415.7 in intraday trade on Friday.

Banking stocks too continued their dream run. In the private sector banking space, Axis Bank gained 7.68 per cent to Rs 1,756.85, ICICI Bank jumped 6.54 per cent to Rs 1,464.8 and HDFC Bank rose 6.27 per cent to Rs 804.7. The PSU banking giant, State Bank of India (SBI) jumped 11.11 per cent to Rs 2,414.30.

Auto stocks also went into high gear. M&M rose 0.57 per cent to Rs 1,110, Tata Motors jumped 5.21 per cent at Rs 449 and Maruti Suzuki rose 9.21 per cent to Rs 2,154. Hero MotoCorp rose 8.22 per cent to Rs 2,397.80 and Bajaj Auto rose 0.7 per cent. Moreover, the capital goods space had a robust run. BHEL galloped 18.33 per cent to Rs 229 and L&T advanced 6.16 per cent to Rs 1,425, among others.