Metals drive another week of gains for stocks

21 July 2007

It was metal stocks at the forefront for the second week running as emerging markets extended their gains. The decline in US indices on Friday came too late and Asian market sentiment remained positive for most of the week.

Metals and commodities stocks have never had it so good in recent years. Following the rally triggered by big-ticket mergers last week, they extended their run this week on forecasts of increased demand from China. The Chinese economy is showing no signs of cooling down as it reported record growth for the second quarter, higher than most forecasts.

After two weeks of underperforming other emerging markets, India did well this week. MSCI India index returned 2 per cent for the week while the MSCI Emerging Markets index returned only 0.5 per cent in US dollars.

For the year, MSCI India index has returned 25.1 per cent in dollars as against 28.1 per cent returned by MSCI Emerging Markets Index. Index returns in rupees for the year at 14 per cent are still considerably lower, because of rupee appreciation against the US dollar.

Domestic Indian benchmark indices sustained their rally for the sixth week in a row. The 50-share Nifty index at the National Stock Exchange gained 1.35 per cent for the week while the 30-share BSE index at the Bombay Stock Exchange added 1.9 per cent. Both indices closed at record highs for the week. Reliance Industries, the largest Indian company by market value, perked up on news reports of new natural gas discoveries by the company.