Sensex sustains rally on tech company results

Frontline Indian indexes started the week on a very firm note, helped by strong gains across major global markets. Cement stocks were the best performers, in anticipation of good quarterly results, followed by metals which have gained in recent weeks on expectations of higher metal prices. Heavyweights Reliance Industries and ONGC provided considerable support while technology stocks extended their gains from the previous week.

Tuesday saw a correction as many of the gainers from previous sessions came under profit booking. Technology stocks were the worst hit, followed by metals. Auto stocks also declined while oil marketing stocks had a good session and cement stocks remained firm

Indexes recovered most of their previous day's losses on Wednesday as select technology, FMCG, metal, banking and telecom stocks gained ground. Tata Steel slipped after the company announced fund raising plans through rights issue of equity shares and warrants. Oil marketing stocks had a weak session while cement stocks corrected modestly

Asian markets declined sharply on Thursday, on fears of rising interest rates and a slowdown in exports from the region. Indian indexes were the least affected in the region, on hopes of good quarterly numbers from frontline companies. Though technology stocks declined, banking and FMCG stocks prevented further losses for the indexes

Strong recovery across Asia and better than expected quarterly numbers from Wipro and Satyam helped the indexes to surge ahead on Friday. Satyam rallied nearly 6.5 per cent after the results announcement. Metal and telecom stocks had a very strong session and the rally received very good support from ONGC and Reliance Industries.

Sensex rallied 513 points or 3.83 per cent during the week and the Nifty surged 167 points or 4.26 per cent over the week.

Mid-caps and small-caps also moved up during the week, but overall gains were lower than the large caps. CNX Mid-Cap 100 index closed the week with gains of 137 points or 2.73 per cent for the week.

Domestic economic and regulatory action

• After the sharp decline during the previous reporting week, inflation is back above 6 per cent. Wholesale price inflation for the week ended 07 April increased to 6.09 per cent from 5.74 per cent reported for the pervious week. Prices of both food articles and manufactured goods increased during the week. Inflation for the same week of last year was at a much lower 3.81 per cent.

  Though the government, especially the finance minister, remains confident that prices would decline for the next reporting week, the unexpected rise would not make life any easier for the RBI. The central bank's policy meeting is scheduled for next week and it is widely expected that the repo rate would be hiked by another 25 basis points. No other monetary policy measures are expected as the RBI had announced increases in both the repo rate and CRR last month, though surprises cannot be ruled out.

US markets, global economy and oil

• US markets rallied this week, on the back of strong corporate results. Earnings expectations for the first quarter of this year were rather muted, on widespread concerns of an economic slowdown in the US. Weakness in the housing market, which many expected to have a negative impact on consumer spending, had led to subdued expectations. However, the companies which have announced results so far have turned in very good numbers on the back of strong demand - both in the domestic US market and overseas.

  The recovery in crude oil prices towards the end of the week also helped the rally as oil stocks gained ground. The Dow rallied 2.8 per cent for the week to end at a new all-time closing high while S&P 500 gained 2.2 per cent. Technology stocks were subdued during the early part of the week and the NASDAQ gained 1.4 per cent for the week.

• Crude oil prices were subdued during the early part of the week and hovered between $63 and $63.5 per barrel. Prices recovered on Friday ahead of presidential elections in Nigeria, a major oil exporter where production facilities have been under rebel attacks for many years now. Near month futures on the NYMEX gained 75 cents per barrel for the week and settled at $64.22 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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