Sensex ends flat for the week after Friday fall

Frontline Indian indexes started the week on a positive note on Monday, but gave up most of their gains to end marginally higher that day. Steel and power utility stocks gained substantially on Monday. Indexes also got support from heavyweight ONGC, but FMCG, auto and select pharma stocks lost ground. Positive trend in other Asian markets also helped support the sentiment and prevented a decline

The RBI's decision to hold interest rates steady came as a pleasant surprise for the markets on Tuesday. Banking stocks led a very broad-based rally as many sectors had started facing demand slowdown because of rising interest rates. Sensex settled above the 14000 mark as the easing of rules on foreign exchange outflows was also received well by the markets.

Indexes recovered from a subdued start on Wednesday and ended with good gains. Pharma stocks gained substantially while autos extended their gains. Indexes also got support from the sustained up trend in ONGC and select FMCG and cement stocks.

On Thursday, the last day of settlement for the April series of derivatives contracts, markets gave up their gains in afternoon trading and closed marginally higher. Oil marketing and engineering stocks gained ground, while select cement and FMCG stocks also did well. Correction in ONGC and Tata Steel and sustained weakness in select technology stocks pared index gains.

Friday saw a sharp correction as results of frontline companies like Reliance Industries and Bharti Airtel failed to cheer the markets. Though the numbers looked impressive when compared to previous year figures, the decline in sequential growth and margin pressures unnerved the markets. Both indexes gave up all their gains from the early part of the week as stocks across most sectors lost substantially.

Sensex gained a marginal 12 points during the week while the Nifty closed unchanged from previous week's levels.

Mid-caps and small-caps moved in line with the overall trend in large caps, but with less volatility. CNX Mid-Cap 100 index closed the week with gains of 33 points or 0.64 per cent for the week.

Domestic economic and regulatory action

• Wholesale price inflation for the week ended 14 April remained unchanged at 6.09 per cent. Arrival of fresh harvest in the market brought down prices of primary food articles as expected, but the decline was negated by an increase in prices of manufactured goods. Cement prices continued to rise during the week, despite many attempts to control cement pricing. Inflation for the same week of last year was at a much lower 3.7 per cent.
  
  Even though inflation remained above 6 per cent for the latest reporting week, the RBI is very confident of bringing down price levels in the medium term. While the target range of between 4 and 4.5 per cent set by the central bank for this year looks very aggressive, the RBI governor this week spoke of the need to align domestic inflation to the rest of the world to achieve financial sector stability. It would indeed be a creditworthy achievement if average inflation for the current financial year can be brought down to around 5 per cent.

US markets, global economy and oil

• US markets sustained the rally this week as well and the Dow index crossed the 13000 mark for the first time to close at a new lifetime high. Strong results from some of the big companies helped the markets to ignore weak economic data, including a lower than expected US GDP growth for the first quarter. The up trend in crude oil prices also did not affect market sentiment, but supported the indices as energy stocks were firm.
  
  The Dow gained nearly 1.25 per cent for the week to end at a new all-time closing high while S&P 500 gained 0.65 per cent. The Dow has added over 4 per cent over the last two weeks. Technology stocks also gained ground this week and the NASDAQ gained over 1.2 per cent for the week.
  
  
• Crude oil prices were volatile this week on fears of supply disruptions in major producing countries. Oil prices surged close to $66 per barrel on Monday, on concerns about likely political unrest in Nigeria, only to fall back on Tuesday. They picked up strength again on Wednesday as US weekly oil inventories continued to decline. After another correction on Thursday, prices moved up on Friday after reports of a failed terrorist plan to attack oil installations in Saudi Arabia. Near month futures on the NYMEX gained $2.23 per barrel for the week and settled at $66.44 per barrel on Friday.
  

Thomas White Global Research, part of the Thomas White International Group, publishes capital market research for global institutions and investment banks, and is headed by Thomas White, a former managing director of Morgan Stanley Asset Management.

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