INDIAN STOCK MARKET WEEKLY REVIEW

WEEKLY MARKET OUTLOOK: 10th AUGUST 2008
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A host of positive factors like sharp fall in crude oil prices, recovery in rainfall and buying by foreign institutional investors helped Sensex close above crucial 15,000 mark. For the week ended August 9, the Sensex settled at an eight-week high of 15,167.82, a net rise of 511.13 points (3.49%) from the previous weekend's close. The Nifty gained 115.95 points (2.63 percent) to close the week at 4,529.50 from last weekend's close.

Crude oil prices declined sharply from a record high $147.27 a barrel hit on 11 July 2008. Oil held near $115 a barrel on weekend giving a positive breadth for the equity market. India's monsoon was above average for the first week in August 2008, helping ease a dry spell that had threatened to delay sowing of crops including rice and cotton.

Foreign institutional investors (FII)’s bought shares worth Rs 1527.90 in the first few days of August 2008 (till 7 August 2008). FIIs sold shares worth Rs 25774.20 in the calendar year 2008, till 7 August 2008. Mutual funds sold shares worth Rs 286.10 in the month of August 2008 (till 7 August 2008).

Amid some positive factors, inflation still remains a major concern for the central bank. Inflation based on the wholesale price index rose 12.01% in 12 months to 26 July 2008, slightly above the previous week's annual rise of 11.98%.

Reserve Bank of India (RBI) on 29 July 2008, raised repo rate by 50 basis points to a seven-year high of 9% to curb inflation and dampen inflationary expectations. RBI also raised the cash reserve ratio (CRR), the proportion of funds that banks must keep on deposit with it, by 25 basis points to 9%. The central bank left its reverse repo and bank rates unchanged. Responding to the RBI's monetary tightening, top lenders HDFC and ICICI Bank and a number of state run bank have raised interest rates.

In the coming week, the market will take cues from June 2008 industrial production figures which the government will release on Tuesday, 12 August 2008. Falling crude oil prices and improvement in south west monsoon will provide some relief to investors. Rising inflation remains a major worry for the markets in the medium term. Marketmen will keenly watch the development of India’s nuclear deal with US. The Board of Governor of the International Atomic Energy Agency (IAEA) on 1 August 2008 unanimously adopted the India-specific safeguards agreement, a key step in operationalisation of the Indo-US nuclear deal.