Worries about near term global economic outlook and the Reserve Bank of India's decision to leave policy rates unchanged overshadowed some reforms announcements made by the government and rendered the market sluggish for a better part of the week ended 21 December 2013.
Recording losses on three of the five sessions, the BSE benchmark Sensex ended the week lower by about 75 points or 0.4% at 19,242. The Nifty index of the National Stock Exchange closed 32 points or 0.5% down at 5848. Midcap and smallcap stocks fared slightly better.
At some point during the week, there were expectations that politicians in the U.S., would agree on a solution to fix the fiscal cliff, but hopes subsided towards the end of the week as differences cropped up. Some hectic profit taking in some front line stocks that had rallied sharply over the last few weeks contributed as well to the market's lower close last week.
But for some heavy buying by foreign institutional investors - they were net buyers to the tune of over Rs 18,000 crore in the current calender month (till Thursday, 20 December) helped limit the downside.
After opening on a cautious note and trading in a tight band for about a couple of hours, the Indian stock market drifted lower on Monday with investors taking some profits ahead of the central bank's monetary policy review. A weak trend in global market amid concerns about the U.S. fiscal cliff and doubts about the near term outlook for global economies too contributed to the market's decline. A downward revision in India's growth forecast weighed as well.
The Sensex ended with a loss of 73 points, while the Nifty declined by 21.70 points that day.
On Tuesday, the market suffered a setback around mid morning as investors reacted negatively to the Reserve Bank of India's decision to leave key policy rates unchanged. However, it rebounded soon following the central bank hinting at some monetary easing in January 2013.
The Sensex eventually ended stronger by around 115 points that day, while the Nifty moved up by about 39 points.
The market started off on a high note on Wednesday, and despite turning a bit choppy amid some profit taking in a few front line stocks, held a good portion of its early gains and signed off on bright note.
Renewed optimism that the U.S. government will manage to fix the fiscal cliff, slightly easing concerns about the eurozone economy and hopes on the reforms front following the Lok Sabha's approval to the proposed banking sector regulations kept the mood fairly bullish right through the session.
While the Sensex notched up a gain of 111 points, the Nifty surged 33 points on that session.
After a weak start and a subsequent smart rebound, the market faltered and plunged into the red around mid morning on Thursday, but recovered once again trimmed down losses later on in the session. Weak global markets and the Bhartiya Janata Party's win in the Gujarat state assembly elections rendered the market weak early on, but expectations of more economic reforms pulled it from lower levels. The Sensex ended 22 points down, while the Nifty closed lower by 13 points.
Worries about the U.S. fiscal cliff resurfaced and rendered the market week on Friday. Amid heavy selling in several blue chip stocks, the Sensex and the Nifty ended the day lower by 212 points and 69 points, respectively.
Metal stocks turned in a fine performance last week, buoyed by encouraging data on Chinese manufacturing activity. Tata Steel, Hindalco, Jindal Steel & Power and Sterlite Industries moved up by 3% - 8%.
Several stocks from the pharmaceutical sector, including Cipla and Sun Pharmaceutical Industries, posted strong gains for the week.
There were some hectic buying in the automobile space as well. Tata Motors gained over 2.5% following the launch of a new variant Tata Aria Pure LX. Maruti Suzuki and Hero Motocorp also closed on a firm note.
FMCG stock Hindustan Unilever, IT majors Tata Consultancy Services, Infosys and Wipro and power equipment maker BHEL were among the other notable gainers.
Larsen & Toubro, HDFC, HDFC Bank, Reliance Industries and ITC ended lower.
The Reserve Bank of India, unveiling its mid-quarter monetary policy review on Tuesday, left the repo rate unchanged at 8%. The Repo rate remains at 7%. The central bank, against wide expectations of a 25-50 basis points cut, left the CRR unchanged at 4.25%.
Stating that economic activity is picking up in the U.S. and the U.K., the central bank said India's inflation still remained high, and that its policy stance will remain sensitive to inflation risks.
According to the data released by the Ministry of Labour & Employment on Thursday, the rate of inflation based on the Consumer Price Index-Agricultural Labourers increased to 10.31% in November 2012 from 9.85% in October 2012. The rate of inflation based on the Consumer Price Index-Rural Labourers edged up to 10.47% in November 2012 from 9.84% in October 2012.
During the week, the Banking Laws (Amendment) Bill, 2011, was passed in Lok Sabha and the Rajya Sabha. The passage of the bill will pave the way for issuance of the new bank licenses by the RBI. The Bill proposes to give the Reserve Bank of India the power to take temporary control of private sector banks in the event of operational irregularities. It would also increase the limit on the voting rights of any one shareholder in a private bank to 26% from 10%. The cap would rise to 10% from 1% for state-run banks.