MARKET OUTLOOK

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The key benchmark indices soared last week shrugging off weak industrial production data, high inflation and soaring global crude oil prices. Depreciating domestic currency against the dollar boosted export driven IT stocks.

The BSE Sensex rose 697.87 points or 4.17% to 17,434.94 in the week ended Friday, 16 May 2008. The S&P CNX Nifty rose 175.10 points or 3.51% to 5157.70 in the week. The BSE Mid-Cap index rose 137.04 points or 1.96% at 7,129.70 in the week. The BSE Small-Cap index rose 114.62 points or 1.35% at 8,620.26.

The wholesale price index rose 7.83% in 12 months to 3 May 2008, higher than previous week's annual rise of 7.61%, government data released on 16 May 2008, showed. It was the highest since an annual reading of 7.93% n 6 November 2004. The annual inflation rate was 5.74% during the corresponding week of the previous year.

India's industrial production growth dropped sharply to 3% in March 2008, slowing from the previous month's unrevised 8.6%, government data showed on Monday, 12 May 2008. It was the slowest annual growth since a 2.4% rise in February 2002.

Manufacturing production rose 2.9% in March 2008 from a year earlier, compared with 8.6% growth in February 2008. Industrial output rose 8.1% in 2007/08 compared with 11.6% in 2006/07.

US light crude for June delivery surged to a record high of $126.98 on Tuesday, 13 May 2008. However, that price eased to $123.74 on 15 May 2008 as rising US distillates stocks and Iran's reassurances that it would not cut crude exports added to a strengthening US dollar to limit the upside.

India's rupee fell to the lowest level since April 2007 to 42.445 per dollar on Wednesday, 14 May 2008 on speculation record crude oil prices will widen the nation's trade and current-account deficits, increasing demand for foreign currencies. The currency also weakened after overseas investors further sold local equities.

Foreign institutional investors (FII) have, so far, sold shares worth Rs 529.10 crore this month, till 14 May 2008. They sold shares worth Rs 10,887.20 crore in calendar year 2008, till 14 May 2008. Domestic funds sold shares worth Rs 639.80 this month, till 14 May 2008.

India's biggest mobile operator by market share Bharti Airtel rose 1.09% to Rs 851.35. The firm is reportedly evaluating a bid for South Africa-based communication services provider MTN Group.

India's largest pharma company in terms of sales Ranbaxy Laboratories gained 8.79% to Rs 510.70. Ranbaxy Laboratories signed a deal to develop new anti-infective drugs for US-based Merck & Co Inc. As per the deal, Ranbaxy will carry out drug discovery and clinical development through Phase II clinical trials, while Merck will be responsible for the development and commercialisation.

India's largest private sector company in terms of market capitalisation and oil refiner Reliance Industries (RIL) rose 4.25% to Rs 2635.20. Recently, RIL had shut all of its 1,432 petrol pumps in the country after sales dropped to almost nil as it could not match the subsidised price offered by public sector competition.

Depreciation in Indian currency against the dollar generated interest in software counters as the Indian software firms earn more than half of their revenue in dollar terms. India's largest software services exporter TCS surged 6.40% to Rs 976.15, Infosys Technologies, the nation's second biggest software exporter by sales, spurted 6.89% to Rs 1871.19 and Wipro, the third largest exporter by sales, flared up 0.99% to Rs 506.15.

India's top tractor maker Mahindra & Mahindra (M&M) fell 1.52% to Rs 662. The company said on Friday, 9 May 2008, it is hiking vehicle prices in the range of 1.5% to 2.5% due to rise in input costs. The price hikes will come into effect from 19 May 2008.

India's largest private sector aluminium company in terms of sales Hindalco Industries jumped 17.37% to Rs 203.70.

India's biggest private sector lender by assets ICICI Bank galloped 7.68% to Rs 941.15

India’s largest cellular services provider in terms of market capitalisation Reliance Communications gained 11.65% to Rs 601.85. Reliance Infratel, a 95% telecom infrastructure subsidiary of the company is reported to have secured the Securities and Exchange Board of India (Sebi)’s nod for a public issue. The Anil Ambani group company may offload a 10.05% stake in Reliance Infratel to raise Rs 5,000-6,000 crore through the IPO.

Infrastructure sector output rose 9.6% in March 2008 from a year earlier, faster than a downwardly revised 7.1% growth in February 2008, data released by the government showed. Output had risen an annual 10.5% in March 2007. It rose 5.6% in the fiscal year 2007/08.

Tourist arrivals in India rose 10.7% to 3,69,677 in April 2008 over April 2007, the government data showed on Monday, 12 May 2008. Foreign exchange earnings from the sector rose 6.8% to $817 million in April 2008 over April 2007.

In the coming week the market is likely to be rangebound in the absence of any major domestic trigger, with Q4 March 2008 results nearing end. The market has reached a stage where liquidity will pull the prices up and valuations will keep them under control. The market will have its bit of volatility due to these two opposing forces. It will test the patience of investors and the nerves of the traders.

Inflation data will be closely watched as it remains as a major worry and hindrance for the domestic growth. High inflation may compel the government to take more fiscal measures to rein in prices in addition to slew of measures taken recently.