The Nifty has to break the range of 5,191 to 5,244 to set a direction
The market closed higher in the week as investors had a strong belief that central banks in the US and Europe would announce new measures to boost their sagging economies. But disappointment both from the US Federal Reserve and the European Central Bank spooked the market on the last two trading days of the week. Concerns about the deficient monsoon and its impact on prices will keep investors guarded, going ahead.
The Sensex gained 359 points (2.13%) to close the week at 17,198 and the Nifty settled 116 points (2.27%) higher at 5,216. Now the Nifty has to break the range of 5,191 to 5,244 to set a direction.
The market notched handsome all-round gains on Monday, a day ahead of the RBI’s quarterly policy review, mainly supported by a global rally. Brushing the RBI’s status quo on interest rates in its quarterly policy review, the benchmarks settled in the positive on Tuesday.
The market, which was choppy during the entire session on account of dismal economic indicators, managed a flat close in the positive on Wednesday. Disappointment from the US Fed and the absence of any domestic triggers resulted in the benchmarks snapping their four-day winning streak and close marginally in the red on Thursday. A let-down by the ECB and concerns about economic growth in the wake of the deficient monsoon saw the market ending lower for the second day on Friday.
The RBI on Tuesday left the key interest rate unchanged to fight inflation, and lowered the growth projection for the current fiscal to 6.5%. The repo rate, at which banks borrow from RBI, has been retained at 8% and the Cash Reserve Ratio (CRR)—the amount of deposits banks keep with RBI in cash—has also been retained at 4.75%. However, the Statutory Liquidity Ratio (SLR)—the amount of deposits banks park in government bonds—has been reduced by 1% to 23%, effective 11th August.
All sectoral gauges settled in the positive with BSE Power and BSE Capital Goods gaining 5% each while BSE Metal ended flat.
The top Sensex gainers were NTPC (up 9%), BHEL (up 8%), Cipla (up 7%), Larsen & Toubro and Sun Pharmaceutical (up 5% each). The losers were Bharti Airtel, Coal India (down 3% each), Hero MotoCorp (down 2%), Hindalco Industries and Tata Steel (down 1% each).
The Nifty was led by NTPC, BHEL, Grasim Industries (up 8% each), Cipla and Asian Paints (up 7% each). Bharti Airtel (down4%), Coal India, Hero MotoCorp (down 3% each), Sesa Goa and BPCL (down 1% each) settled at the bottom the index.
The HSBC India Manufacturing Purchasing Managers’ Index (PMI)—a measure of factory production—declined to 52.9 in July, from 55 in June. Although it showed the weakest growth rate since November, the index has remained above the 50 mark—below which it indicates contraction.
India’s exports contracted for the second consecutive month in June by 5.45%, year-on-year, to $25 billion on account of growing economic uncertainties in the Western markets. Imports dipped more sharply, by 13.5% to $35.37 billion during the month, compared to $40.8 billion in June 2011, resulting in a narrower trade deficit of $10.3 billion.
Reflecting a slowdown, the growth of eight core sectors slipped to 3.6% in June from 5.6% in the same month last year, weighed down by contraction in natural gas, fertiliser and steel output. The cumulative expansion of these industries in April-June 2012 slowed to 3.6% from 5.2% in the same period last year, according to official data released on Wednesday.
Deficient monsoon is likely to pull down the economic growth in the current fiscal to about 6%, from 6.5%, a year ago, the Planning Commission deputy chairman Montek Singh Ahluwalia said on Friday. India’s crucial monsoon is expected to be 15% deficient this season, according to the India Meteorological Department (IMD).
On the international front, the developments in Europe will play a role in leading the markets next week. Analysts are now hoping the Fed will announce a new quantitative easing plan at its meting next month, the programme could involve mortgage securities.
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