Weekly Wrap: Sensex starts New Year on firm note

Last Updated: Sat, Jan 07, 2012 11:42 hrs

The market saw some bright spells in positive territory during the week ended Friday, 6 January 2012, as investors indulged in some hectic buying at times amid expectations of a rate cut from the central bank, a substantial drop in food inflation and fairly encouraging data on manufacturing activity in December.

While the BSE benchmark Sensex ended the week with a gain of around 413 points or 2.7% at 15,868, the broader 50-stock Nifty index of the National Stock Exchange surged 130 points or 2.8% to 4754. Midcap and smallcap stocks too had a fairly good week, despite remaining subdued at times. While the BSE Midcap index rose 2.4%, the Smallcap barometer ended stronger by about 2.8%.

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According to the data released last Monday, India's manufacturing activity surged to a six-month high in December thanks to a spike in factory output and new orders from domestic and international firms. The HSBC Markit India Manufacturing PMI jumped to 54.2 from 51 in November, its biggest monthly rise since April 2009.

According to the data released by the government on Thursday, 5 January 2012, food inflation plunged into the negative territory in the fourth week of December, due largely to base effect. The data showed that food inflation shrank by 3.36% in the week ended 24 December 2011. In the previous week it was up 0.42%.

While inflation in the Primary Articles group fell to 0.1% in the week under review, from 2.7% in the week ended 17 December 2011, inflation in the Fuel & Power group stood at 14.60% in the week ended 24 December 2011, versus 14.37% in the previous week.

Inflow from foreign institutional investors contributed significantly to the market's positive show last week. According to the data available from the exchanges, FII bought shares worth a net Rs 776 crore in three trading sessions (Tuesday to Thursday), after pulling out funds in the previous three sessions.

The government's decision to allow qualified foreign investors to directly invest in the Indian equity market from 15 January 2012 raised expectations of more fund inflow into the market and lifted sentiment to a notable extent. Following the decision, qualified foreign investors will now be able to invest individually up to 5% of the capital of the Indian company. Cumulatively, they can invest up to 10% of the capital of the company being invested in.

The Sensex started off the week with a modest 63-points gain. The Nifty edged up by about 12.50 points on Monday. Buoyed by a firm trend in global markets, the bulls went on a rampage on Tuesday and lifted the Sensex and Nifty by 421 points (2.7%) and 129 points (2.8%), respectively.

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However, price movements, over the next three sessions were extremely choppy with investors choosing rallies to trim down positions, amid concerns about the economic situation in Europe and on caution ahead of quarterly results from India Inc. After posting modest losses on Wednesday and Thursday, the market ended with slender gains on Friday.

Investors chose to pick up some battered down automobile, capital goods and realty stocks during the week after the Reserve Bank of India governor hinted at some monetary easing. However, it was not smooth sailing up north for all and sundry in these sectors, as investors were quite selective with their preferences.

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