Indices started the week on a firm note as Asian markets
rallied. Expectations of good quarterly numbers helped
the indices to scale new highs. Steel and engineering
stocks were the best performers.
saw a firm start following very good results from TCS
and HCL Tech, but the indices lost their way in afternoon
trades on profit booking. Some of the big gainers from
the previous day corrected while engineering stocks continued
continued to consolidate on Wednesday even as engineering
stocks and select banking stocks gained. Oil marketing
stocks rallied on lower crude oil prices.
morning saw a strong rally and the indices scaled new
highs, helped by strong gains in ONGC and Reliance Industries.
However, the indices turned volatile in the afternoon
and gave up part of their gains.
than expected results from Reliance Industries did not
help the overall sentiment on Friday and the indices drifted
down on profit booking. Select technology stocks came
under pressure, as their results were disappointing. An
afternoon recovery helped the indices to cut down part
of the losses
gained 126 points or 0.9 per cent during the week and
the Nifty added 38 points or 0.94 per cent over the week.
Mid-caps and small-caps did well for the first three days
of the week as trading interest shifted to the smaller
stocks in anticipation of good quarterly numbers. On Thursday,
they gave up all their gains in the afternoon and closed
flat. Mid-caps and small caps corrected on Friday, mostly
on profit booking.
Mid-Cap 100 index closed the week with gains of 55 points
or 1.05 per cent for the week.
economic and regulatory action
quarter results announced so far, especially from some
of the large companies, are better than expectations.
While the average sales growth of close to 40 per cent
is very impressive what has come as a surprise is the
improvement in operating margins achieved by some companies.
Margins were under pressure in recent quarters and most
analysts were expecting a further contraction in the
latest reporting quarter as well. Most frontline technology
companies managed better margins during the quarter,
despite the Rupee appreciation, while Reliance Industries
achieved a substantial improvement even when global
benchmark margins declined.
this performance is very encouraging and may help
the market to scale further heights, the danger is
that expectations would also rise further. Most overseas
analysts are worried that expectations as expressed
by rising price-earning multiple for the market as
a whole are already very high. The sustained
out-performance by leading companies may create complacency
in the market. When the performance starts to flounder
at some point, as it inevitably would, the heightened
expectations would cause a much deeper crash which
would be very painful.
has once again revised its GRP growth forecast for the
current year following the better than expected expansion
during the first half. The revised forecast of 8.4 per
cent for the current year equals last financial year's
actual growth rate. NCAER also expects inflation to
decline to 5 per cent by end-March on lower crude oil
agency Moody's said India cannot sustain growth rates
above 9 per cent over the medium term because of capacity
constraints. The agency expects current growth rate
to be sustained for another year, after which the capacity
constraints and shortage of skilled labour would lead
to a slow down. The agency estimates the Indian economy's
long-run growth potential to be around 6.5 per cent.
oil ministry has backtracked from last week's announcement
regarding a review of retail fuel prices by this month
end. The minister now says the government would review
the situation only if the Indian crude oil basket falls
below $50 per barrel and stabilises at least for a month.
However, political considerations and rising inflation
may force the oil ministry to reconsider this view.
price inflation for the first week of this year increased
to 6.12 per cent, a two-year high, from 5.58 per cent
reported for the pervious week. The rise in inflation
was mostly on account of higher prices of primary food
articles even as manufactured products reported a modest
decline in prices. Inflation was at 3.86 per cent during
the same week of previous year and part of the rise
is also because of the low base effect.
inflation has moved way past the upper limit of RBI's
target range of 5 - 5.5 per cent for the year-end, economists
and analysts are not unduly worried. They believe that
the effect of lower crude oil prices has not reflected
so far and expect inflation to decline over the next
two months. The government too does not appear to be
very concerned and may well be prepared for reducing
retail fuel prices. However, higher inflation is almost
certain to force the RBI to go in for a rate hike of
at least 25 basis points.
markets, global economy and oil
markets were subdued this week on growing concerns about
the sustainability of corporate profit expansion. Even
the companies, which announced better than expected
numbers were cautious in their guidance for current
year. Data showing rising producer price inflation led
to a further erosion of hopes about an early rate cut
by the US Fed.
the outlook for the US economy has improved in recent
weeks. There is growing consensus that the housing
market may not see further declines and may even recover
modestly this year. Lower energy prices have lifted
consumer confidence to a three-year high and should
support volume growth for most consumer businesses.
Job additions and average wage growth also remain
robust, which is more good news for the economy. Though
the possibility of an interest rate cut has receded,
the market may settle for steady economic growth and
interest rates instead of a rate cut and more weakness
for the US economy.
Dow scaled a new lifetime high on Tuesday but declined
modestly later in the week. Technology stocks saw
sustained profit booking for three days from Tuesday
on concerns of stretched valuations before stabilising
on Friday. The Dow gained less than 0.1 per cent for
the week while S&P 500 ended with very marginal
losses. The NASDAQ lost more than 2 per cent for the
agency Standard & Poor's expects Asian economic
growth to remain robust in 2007. The agency has forecast
a growth rate of 5.3 per cent for the region, lower
than 5.6 per cent achieved for last year. India would
be the third fastest growing economy this year in the
region, behind China and Kazakhstan, according to the
oil prices continued to decline this week even after
losing nearly $10 per barrel over the previous two weeks.
After a steady start to the week, oil prices tumbled
on Tuesday as leading OPEC members including Saudi Arabia
ruled out the possibility of an emergency meeting of
the oil cartel to discuss the oil price decline. The
oil cartel believes its earlier production cuts have
removed part of the excess supplies in the market and
the fundamentals of the market have improved. OPEC had
announced production cuts totalling 1.7 million barrels
per day to help stabilise falling oil prices.
than expected US oil inventories led to further weakness
and crude oil fell below $50.5 per barrel on Thursday.
Friday saw a pull back, which helped pare losses for
the week. Near month futures on the NYMEX lost close
to a per cent for the week and settled at $52.04 per
investor Jim Rogers, who had predicted a long-term bull
market in commodities, still believes that crude oil
will bounce back from this decline. He believes that
fundamentals of the energy markets make it imperative
that oil prices would sustain
a long term up trend. He predicted that prices would
rise above $100 per barrel and even $150 per barrel,
but refused to give any timeline. Crude oil had set
a lifetime high of over $78 per barrel last year.
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above at the time of writing this article. This analysis/report
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