Metals strengthen market rally though technology disappoints

14 July 2007

In arrangement with Thomas White Global Research

As global financial markets get integrated more, it is no surprise that big-ticket global deals rub-off on emerging markets in a big way. Even as the Rio Tinto – Alcan deal helped metal stocks shine this week on hopes for further consolidation in the sector, improved optimism about the US economy made emerging market investors more confident. India was no different this week, as metal stocks pushed domestic indices to record highs even though early results from technology companies confirmed fears of rising margin pressures.

India underperformed other emerging markets this week as well. MSCI India index managed returns of only 2.4 per cent for the week while the MSCI Emerging Markets index returned 3.7 per cent in US dollars.

For the year, MSCI India index has returned 22.65 per cent in dollars as against 27.48 per cent returned by MSCI Emerging Markets Index. Returns in rupees at 12 per cent remains substantially lower than US dollar returns, as the currency has appreciated this year.

Indian large-cap domestic indices sustained their up trend for the fifth successive week to end at new lifetime highs. The 50-share Nifty index at the National Stock Exchange gained 2.74 per cent for the week, moving past the 4500 level for the first time. The 30-share BSE index at the Bombay Stock Exchange added 2.07 per cent for the week and settled comfortably above the 15000 level.