Weekly Wrap: Strong global cues lift Sensex, Nifty by over 6% in Diwali week

According to the data released by the government on Thursday, food inflation in India accelerated to a six-month high in the middle of October, driven by soaring vegetable prices. Meanwhile, inflation in the fuel group declined.

Food inflation rose to 11.43% year on year for the week to October 15, compared with 10.6% in the preceding week, according to the data released by the government. Food inflation stood at 14.20% in the corresponding week last year

Inflation in the Primary Articles group increased to 11.75% in the week under review, from 11.18% in the week ended October 8, according to the Commerce Ministry statement. It was at 17.91% in the year-ago period.

Inflation in the Fuel & Power group fell to 14.70% in the week ended October 15 from 15.17% in the previous week, the Government data showed. It was at 11.25% in the comparable week of the previous year.

While the BSE benchmark Sensex ended the week with a gain of about 1,020 points or a little over 6% at 17,805, the broader 50-stock Nifty index of the National Stock Exchange spurted 310 points or 6.15% to 5,361. Midcap and smallcap stocks too attracted some strong buying during the week.

The week started off on a firm note with investors picking up stocks amid hopes the European leaders will find a solution to end the financial crisis in the zone, during their summit on 26 October 2011. However, the mood was a bit cautious ahead of the central bank's monetary policy, due on Tuesday. While the Sensex ended the session with a 150 plus points gain, the Nifty closed nearly 50 points up.

After a firm start and a modest upmove, the market tumbled on Tuesday after the Reserve Bank of of India hike the repo and reverse repo rates by 25 basis points each to 8.5% and 7.5% respectively. But then, after struggling for around a couple of hours, the market moved up north with investors going on a buying spree amid hopes the high interest regime will come to an end by the end of this calendar year.

Hopes of interest rates peaking out rose after the central bank governor stated that rate hikes may not be warranted beyond December. The Reserve Bank of India said that changing the policy stance when inflation is still far above the tolerance level entailed risks to the credibility of the bank's commitment to low and stable inflation. The bank said the growth momentum has slowed down and that inflation will start cooling by December this year and is likely to come down to 7% March, 2012. The apex bank lowered the growth target to 7.6% for the current fiscal.

Short-covering due to expiry of October series derivatives contracts and some strong results from India Inc contributed to the sharp rally in late afternoon trade. While the Sensex ended the session with a gain of 316 points or 1.9% at 17,255, the Nifty rose 93 points or 1.8% to 5192.

Amid thin volumes, the Sensex and Nifty ended the Muhurat session modestly higher, gaining 34 points and 10 points respectively. But the first full session of Samvat year 2068 on Friday saw the bulls at their aggressive best. Following the European leaders aggreeing to raise the eurozone bailout find to Euro 1 trillion and deciding to recapitalize banks besides striking a deal with private lenders and pursuading them to take 50% looses on Greek debt, markets in Europe and the U.S. rallied sharply on Thursday, setting up the stage for the Indian bulls to perform their act on Friday.

Storming the ring at the stroke of the opening bell - the Sensex shot up by over 400 points in a flash on Friday - and staying put right till the end of the session, the bulls went about lapping stocks from across several sectors and lifted the benchmark indices Sensex and Nifty to their best closing levels since August 4, 2011. While the BSE barometer ended the day with a gain of 516 points, the Nifty gained 159 points.

All the metal stocks in the Sensex, Hindalco, Stelrite Industries, Tata Steel, Jindal Steel and Coal India ended with strong gains last week. Besides these four, several other stocks from the metal space posted impressive gains, thanks to a firm trend in the global metal market.

Top gainers | Worst losers | More tips

Tata Motors, which moved up by nearly 16%, was the biggest gainer in the automobile space. Jaiprakash Associates, DLF, Mahindra & Mahindra, HDFC, Reliance Industries, ICICI Bank, Larsen & Toubro, ONGC, NTPC ended Hindustan Unilever sharply higher.Hero Motocorp, Tata Consultancy Services, Wipro, Infosys, ITC and Cipla also closed with strong gains.

Mirroring widespread buying in front line stocks, just two stocks, out of the 30-stock strong in the Sensex, ended the week on the negative side.