Weekly Wrap: Sensex, Nifty gain nearly 5% on growth optimism

Weekly Wrap: Sensex, Nifty gain nearly 5% on growth optimism

Last Updated: Sat, Jun 07, 2014 08:32 hrs

The Indian stock market scaled new peaks during the week ended 6 June 2014, as investors kept picking up stocks, amid expectations the economy will soon see a fairly decent recovery.

The Reserve Bank of India's decision to cut the Statutory Liquidity Ratio by 50 basis points, the European Central Bank's move to cut its interest rate to 0.15% and encouraging news on the monsoon front, were some of the factors that contributed to the market's impressive surge last week.

The BSE benchmark Sensex rallied to a new all-time high at 25,419.14, ended the week with a gain of 1179.12 points or 4.86% at 25,396.46. The Nifty index of the National Stock Exchange, which raced to a new high at 7592.70, settled at 7583.40, gaining 353.45 points or 4.88% for the week.

Midcap and smallcap stocks did even better, with investors thronging several counters in these segments. The BSE Midcap index climbed up 8.4%, while the Smallcap barometer ended nearly 7.5% up.

Encouraging data on India's manufacturing activity and heavy buying by foreign institutional investors lifted the Sensex up by around 468 points or nearly 2% on Monday. The Nifty gained 132.55 points or 1.8% that day.

On Tuesday, the Reserve Bank of India kept the repo rate and the Cash Reserve Ratio unchanged at 8% and 4%, respectively. But its move to cut the Statutory Liquidity Ratio by 50 basis points proved strong enough trigger for investors to lap up stocks. The Sensex jumped nearly 175 points that day, while the Nifty closed higher by 132.55 points.

After a choppy ride amid weak global cues, the market ended weak on Wednesday, with the Sensex losing about 53 points and the Nifty declining 13 points.

Positive news flow on the monsoon front lifted sentiment on Thursday. While the Sensex ended up 214 points, the Nifty closed with a gain of 71.85 points.

The European Central Bank's decision to cut its lending rate to 0.15% and the move to reduce its deposite rate to below zero to revive growth in the region, buoyed up sentiment across the globe on Thursday evening. The resultant buying spree on the Indian bourses on Friday took the Sensex and the Nifty to new all-time highs on Friday afternoon.

While the Sensex ended stronger by about 377 points on Friday, the Nifty closed up 109.30 points.

Speculation that the government might soon allow a hike in gas and oil prices resulted in some heavy buying in the oil space last week. ONGC gained a whopping 23%, hitting a record high in the process. Reliance Industries, ONGC, Cairn India, Hindustan Petroleum Corporation, BPCL, Indian Oil Corporation, Gujarat State Petronet and GAIL India rose sharply, gaining 5% - 23%.

Buoyed by some encouraging data out of China and the Odisha government's decision to allow mining in Odisha lifted metal stocks last week. Sector majors Tata Steel, Hindalco, NMDC, Sesa Sterlite and Jindal Steel & Power notched up handsome gains.

Among automobile stocks, Hero Motocorp ended nearly 15% up, Tata Motors and Maruti Suzuki gained around 5.5%. Bajaj Auto rose 4.7%.

Capital goods stocks, led by heavyweights Larsen & Toubro (9%) and BHEL (8.5%), housing finance major HDFC (6.7%), telecom stock Bharti Airtel (3.4%) and IT major Infosys (2%) ended with strong gains. Wipro edged up marginally, while Tata Consultancy Services closed weak.

Several bank stocks, including sector heavyweights State Bank of India (7.55), ICICI Bank (4.5%), HDFC Bank (2.7%), Axis Bank (7.5%), Punjab National Bank (8%) and Bank of Baroda (7.3%) closed with strong gains, buoyed by the central bank's decision to cut SLR by 50 basis points.

While unveiling its monetary policy on Tuesday (June 3, 2014), the Reserve Bank of India said it was appropriate to leave the policy rate unchanged and to allow the disinflationary effects of rate increases undertaken in the September 2023 - January 2014 period to mitiage inflationary pressures in the economy.

India's Service sector activity expanded for the first time in 11 months in May, the results of a survey by Markit Economics and HSBC bank showed.

The HSBC Services Business Activity Index came in at 50.2 in May, up from 48.5 in April, helped by a rebound in new orders. However, the rate was expansion was very small.

Meanwnhile, the HSBC India Composite Output Index, which measures the performance of both the manufacturing and non-manufacturing sectors, grew for the first time in 3 months coming in at 50.7 in May following the reading of 49.5 score for April.

In a significant move on Thursday, the European Central Bank cut its lending rate to a record 0.15% and slashed its deposite rate to below zero, aiming to revive the sagging eurozone economy.

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