Markets extend gains on easing inflation

30 June 2007

In arrangement with Thomas White Global Research

Indian markets extended their gains for the third week as the sustained decline in inflation raised hopes of lower interest rates. However, strong economic momentum and rising crude oil prices are likely to deter the country's central bank from considering a cut in key rates in the near future.

After underperforming for two weeks, India nearly caught up with other emerging markets this week. While other markets corrected modestly on higher energy prices and concerns of lower export demand from the US, Indian stocks had a reasonably good week. The MSCI India index returned 1.18 per cent this week in US dollars, while the MSCI Emerging Markets index lost 0.39 per cent.

For the year, MSCI India index has returned 16.79 per cent in US dollars as against 17.75 per cent returned by MSCI Emerging Markets Index. Return on the MSCI India index in rupees is lower at 7.47 per cent as the US dollar has depreciated against the rupee this year.

Among domestic Indian large-cap indices, the 50-share Nifty index at the National Stock Exchange gained 1.55 per cent for the week. The 30-share BSE Sensex added 1.27 per cent for the week. This is the third successive week of gains for the Indian indices and both are very close to their historic highs.