Stocks struggle to stabilize after previous week''s correction

04 August 2007

If last week''s correction in stock prices was quite dramatic, this week''s stabilisation was no less so. As often happens immediately after sharp market moves in either direction, stocks were highly volatile this week.

After Monday''s relative stability, stocks recovered substantially on Tuesday as global markets stabilized. But concerns over worsening global credit risks gained upper hand on Wednesday and caused another bout of heavy selling. Towards the end of the week, stocks recouped part of Wednesday''s losses.

MSCI India index lost 0.53 per cent for the week while the MSCI Emerging Markets index gave up 0.4 per cent in US dollars. The MSCI India index had lost nearly 3 per cent in dollars last week when the Emerging Markets index lost 5.6 per cent.

India retains a marginal lead in returns for the year, when compared to other emerging markets. The MSCI India index has returned 20.72 per cent in dollars for this year, marginally ahead of 20.46 per cent returned by MSCI Emerging Markets Index. Index returns in rupees for the year are still at a substantially lower 10.05 per cent, as the currency has appreciated against the US dollar.

Domestic Indian benchmark indices also ended lower for the week. The 50-share Nifty index at the National Stock Exchange lost 0.97 per cent for the week while the 30-share Sensex at the Bombay Stock Exchange declined 0.64 per cent.

Rates on hold; outlook stable: With inflation mostly under control, though not quite benign, India''s central bank (RBI) expectedly left key interest rates unchanged at its policy meeting this week.