Last week, the markets continued to extend the gains of the previous week, with the Nifty moving higher to pre-budget levels of 5200. The RBI’s credit policy was seen as a positive measure, even after the central bank raised the CRR by 0.25% but kept the repo and reverse repo rates unchanged. The RBI governor forecast India to grow at 8% to 8.50%. This along with the positive mood in the international markets took the indices to higher levels.
There were occasional round of profit booking at higher levels but the indices managed to close higher than the previous week. The BSE index added 475 points from last week to close above the 200-day moving average at 17600. Nifty on the other hand closed much higher above its 200-day moving average, rising by 116 points to close at 5228.
World markets
Global markets were on an upswing following the 25 bps cut in interest rates by the Fed and on reports that of the US economy expanding by 0.60%. Indices across the globe moved higher, with the Dow regaining peak 13K after a span of 3 months. Most of the world indices, including Asian as well as European, gained by more than 2% each in the last week.
Crude prices retreated from all-time highs at $120 levels to fall to $110 levels after new refineries were started in the European region. Prices managed to rebound to $116 levels on the last day of the week, but yet closed lower by $2 than the previous week.
Sectoral indices
Most of the sectoral indices managed to gain for the second straight week, once again demonstrating a positive mood across all sectors. Reality was the biggest gainer with reality majors Unitech, DLF and HDIL gaining ground as fears of a interest rates rising subsided after RBI kept the key rates unchanged.
Auto was the surprise pack, with the auto index gaining over 5% with the help of gains from Maruti, Telco and M&M. (All stocks rose by over 8% each.) Banking stocks too gained over previous week, despite the CRR hike, on back of good Q4 results by most of the banking stocks. IT stocks too extended their gains over the last two weeks as the rupee depreciated to 40.78 to the dollar. The sugar sector was the only one which had a decline over the previous week after results failed to enthuse the Street.
Mid-cap action
Mid- and small-caps stocks continued to gain positive momentum. In fact, it was the mid-cap space which attracted a lot of action and activity. There were selective gains spread across various sectors. Sesa Goa was amongst the very few to move to new all-time highs of 4,350 levels after the company announced strong Q4 results, coupled with a bonus and stock split.
Bombay Dyeing was another stock which hit a new peak of 1,070 levels. The mid-cap index gained over 2.50%, making it a fourth week of successive gains.
Small-caps were on the other hand a little on the sidelines but managed to close higher than the previous week. Fertiliser stocks which have been rising since the previous two to three weeks were in for some beating after Nagarjuna Fertilizers results disappointed the Street.
Wade cautiously
Markets continued to move to a higher ground despite inflation hitting a 42-month high of 7.57%. The Sensex has now risen from levels of 15,300 to 17,600 in the last four weeks. Both the NSE and BSE have moved above the 200-day moving average after a span of two months.
Technically, this indicates a positive sign for the indices which could head higher until they stay above the 200-day moving average (Nifty 5160 and Sensex 17400 levels). On the higher side, we expect markets to face stiff resistance at 5,325-5,350 levels and we advise to book profits at higher levels. With the results season coming to an end and most of the major events, such as RBI policy and Fed meet, behind us, it would be pure market dynamics that would decide the course of the indices.