Markets at new lifetime highs despite global uncertainty

Rex Mathew
03 September 2005

Markets opened the week on an uncertain note as crude oil touched $70 for the first time ever on Monday. Record crude prices led the frontline indices to extend previous week's losses and close lower. Ironically, high crude pries led to a recovery and smart gains for the markets on Tuesday.

Declining investment flows and higher oil import bill have been keeping the rupee under pressure for the last few weeks. By Tuesday, the rupee gave in and broke through the Rs44-to-a-dollar mark to a recent low. This led to all round buying in frontline technology stocks and lifted the markets.

Buying in technology stocks continued on Wednesday as well and kept the indices on an uptrend. Reports of a large order from ABN Amro to TCS and Infosys kept the interest in technology alive.

On Friday, the finance minister decided to help the markets and indicated a possible reduction in excise duty for the auto sector in the next budget. The government also decided to sell an 8-per cent stake in Maruti to domestic institutions. Led by the auto majors, the sensex managed to close the week at 7900. The Nifty closed well above 2400.

The Sensex gained over 266 points or close to 3.5 per cent during the week and the Nifty added 78 points or well over 3 per cent over the week.

Mid-caps tracked the movements in frontline stocks during the week. After closing lower on Monday, the mid-cap index posted strong gains for the rest of the week. The weekly gains on the CNX Mid-Cap 100 index were also similar to the frontline indices. The index added 120 points during the week or well over 3 per cent.

Domestic economic and regulatory action

• The RBI has maintained its full year GDP growth forecast at 7 per cent despite the significant rise in oil prices. The central bank has also kept the year-end inflation target of between 5 and 5.5 per cent unchanged.