Markets started the week on a firm note, helped by strong
global markets and healthy corporate numbers. Sensex went
past 10800, helped by banking and engineering stocks,
before seeing some selling in afternoon trades and closing
below that level.
last hour rally on Tuesday helped the indices to regain
all their early losses and close with modest gains. Engineering
stocks sustained their rally, but select banking stocks
came under pressure.
saw the Sensex moving close to 10900 mark on strong gains
for auto, technology and metal stocks. Index heavies,
ONGC and Reliance Industries, also gave a helping hand
to maintain the up trend.
Sensex finally crossed the 11000 mark on Thursday after
a gap of nearly a month. Private sector banking and auto
stocks were in the limelight, but profit booking in the
afternoon saw the Sensex settling below 11000.
index broke past that barrier once again on Friday and
held above that level for some time before giving up again.
Losses in PSU banking stocks following the directive from
finance ministry on lending rates affected sentiment.
Reliance Industries contributed to the afternoon decline
and the indices ended lower.
Sensex gained 187 points or 1.75 per cent during the week
and the Nifty added 46 points or 1.47 per cent over the
Mid-caps and small caps also moved in line with the large
caps and ended with good gains for the week. Investors
remained interested in the smaller stocks after the superior
earnings growth reported for the first quarter, though
some profit booking was seen towards the end of the week.
The CNX Mid-Cap 100 index closed the week higher by 67
points, or 1.75 per cent.
economic and regulatory action
finance ministry directive to PSU banks to get board
approval for interest rate hike decisions halted the
rally in banking stocks towards the end of the week.
Banking stocks had perked up on expectations the RBI
may not be inclined to raise interest rates for the
rest of this calendar year. The recent PLR hikes announced
by the banks would have protected their margins at least
for the current financial year.
the exact implications of the finance ministry missive
to banks are still not known, as it is not clear how
far the ministry would go on the face of widespread
criticism, the issue has considerably dampened the
sentiment in PSU banking counters.
of these banks had put up a credible performance during
the April-June 2006 quarter. Though stability of earnings
on a quarter-to-quarter basis is still an issue with
most PSU banks, they have shown enough signs that
they can take on their private sector and foreign-owned
competitors and thrive in a very competitive environment.
banking stocks have traditionally attracted much lower
valuations than their private sector peers purely
because of the concerns over government interference
and management autonomy. After they improved their
competitiveness, it was expected that the valuation
gap with private sector banks would narrow. Such hopes
would now stand belied and sadly, the minister, supposedly
the most reformist in the cabinet, should be responsible
for this occurrence.
price inflation for the week ended 22 July increased
to 4.67 per cent from 4.52 per cent reported for the
previous week. Prices of primary food articles continued
the uptrend while select manufactured items also became
markets, global economy and oil
markets held steady during the week after the previous
week's recovery. Corporate results and news flows were
mixed, leading to some volatility during the week. Hopes
about a pause in interest rate hikes by the US Fed at
its meeting scheduled for next week helped prevent further
opening the week on a modestly subdued note, US markets
declined on Tuesday. Indices gained for the next 2
days, but the gains were given up on the last day
of the week.
Dow gained less than 0.2 per cent during the week
while the S&P 500 added a very marginal 0.05 per
cent. Technology stocks underperformed yet again and
the NASDAQ index lost close to 0.45 per cent over
economic data released during recent weeks make the
case stronger for keeping interest rates unchanged.
After the US GDP growth rate for the second quarter
came in at 2.5 per cent annualised, a key survey showed
that growth in the services sector has slowed down.
Both these key economic indicators would have considerable
influence on the Fed decision when the governors meet
employment data for the month of July released yesterday
indicates some easing off in the labour markets as
well. New job creation was lower than forecast and
unemployment rate, though still less than the long
term average, increased for the first time in nearly
6 months. Strong job growth and rising wages were
some of the key factors which have kept the US Fed
to keep raising interest rates since mid-2004.
Statements from senior Fed officials in recent months
and minutes of the recent Fed meetings have given
enough indications that the Fed would prefer to stop
raising rates as soon as economic indicators show
some signs of slowing down. Though inflationary pressures
remain, especially from high crude oil prices, the
modest slow down in key indicators should see an easing-off
of consumer spending in the coming months.
last week, consensus forecasts were in favour of a
pause in hikes after another 25 basis point hike this
month. More economists now expect the Fed to take
a pause next week, even though average wages have
the crude oil market, developments in the Middle East
took a back seat during the week and the storm season
took over. Traders were glued into weather forecasts
for hurricane warnings in the Gulf of Mexico. The weathermen
have given a warning that a named tropical storm may
develop into a hurricane.
in the Gulf of Mexico had severely affected oil installations,
including offshore platforms, and caused refinery
shutdowns last year. Oil prices soared at every new
hurricane threat. This year has also been forecast
as a busy hurricane season and oil prices are bound
to see considerable action in the next couple of months.
prices touched $76 per barrel by the middle of the
week before correcting modestly on forecasts that
the intensity of the hurricane
may be lower than expected. Near month futures on
the NYMEX settled at $74.6 for the week, higher by
nearly 1.8 per cent from previous week's closing levels.
The author may have positions in the stocks mentioned
above at the time of writing this article. This analysis/report
is only for the purpose of information and is not an investment
advice. Readers are advised to consult a certified financial
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provided in the content the author or publisher shall
not be held responsible for any loss caused to any person