Market Update: Week starting 21st July 2008

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Market to take queues from upcoming trust vote and oil prices

The week gone by was interesting for the Indian markets as after the equities were battered at the start of the week owing to the weak sentiment caused by political uncertainty, soaring crude oil prices and higher inflation, the benchmark indices made a smart recovery during the last two days. The market saw renewed buying as global markets surged as soaring crude oil prices showed sings of abatement falling below $130 mark after hitting record high recently. Sensex gained more than 1050 points in last two days of the week. For the week ended July 18, 2008, the BSE Sensex gained 1.2%, while the NSE Nifty added 1.1%.

The barometer index BSE Sesnex rose 165.55 points or 1.23% to 13,635.40 in the week ended Friday, 18 July 2008. The S&P CNX Nifty edged up 43.25 points or 1.06% to 4,092.25 in the week. The BSE Mid-Cap index shed 125.95 points or 2.35% to 5,239.39. The BSE Small-Cap index fell 257.77 points or 3.84% to 6,455.89.

Foreign institutional investors (FIIs) sold shares worth Rs 2,235.70 crore in the month of July 2008 so far, till 17 July 2008. FIIs sold shares worth Rs 27,701 crore in the calendar year 2008. Mutual funds have bought shares worth Rs 522.90 crore in the month of July 2008 so far, till 17 July 2008.

Inflation based on the wholesale price index rose 11.91% in 12 months to 5 July 2008, just above the previous week's annual rise of 11.89%, government data released today, 17 July 2008, showed. It is the highest reading since annual numbers in the current series became available in April 1995.

Reserve Bank of India on 24 June had hiked both repo rates and cash reserve ratio by 50 basis points each to tame rising inflation. There are expectations of further monetary tightening in quarterly monetary policy review of RBI scheduled on 29 July 2008.

Industrial production rose 3.8% in May 2008, much lower than revised 6.2% growth in April 2008, the government data released on Friday, 11 July 2008, showed. Industrial production growth for April 2008 revised downwards to 6.2% from earlier 7%.

Going ahead, the market will take cues from the outcome of the government’s vote of confidence in parliament scheduled on 21 July 2008 and 22 July 2008. Survival of the government in the vote of confidence will boost bourses. Movement of crude oil prices also holds key. Fears of further monetary tightening by the Reserve Bank of India continue to haunt bourses.