Week In Reviews ON 2nd July;2011
The Indian stock market rallied as FII inflows turned around and the Government hinted at getting on with key reforms with a belated fuel price hike. A string of encouraging economic statistics like drop in food inflation, contraction in current account deficit and improvement in core sector growth added fuel to the fire.
Softening crude oil prices, coupled with a growing confidence that Greece will avoid an imminent default also lent good support to the Indian markets.
The stock markets across the globe staged tremendous rally, on back of the news that the trouble hit Greece will be saved from a debt default. They will be extended financial aid for reviving their current economic situation - following the Greek parliament's decision to adopt the austerity bill, by which they will cut the spending and raise the domestic taxes to handle the current state of affair. The Greek stock market index – Athens General –appreciated 5.37%. NSE Nifty appreciated 155 points (+2.85%) and closed at 5627.20; BSE Sensex rose 522 points (+2.86%) to 18762.80. The sentiment remained the same in the Midcap and Smallcap segments also each appreciating 3.45% and 3.81% each to end the week's trading at 6901.67 and 8224.41 respectively.
Despite of the initial rally, the domestic market erased a portion of the gains on some negative news flows. The Auto sales number released by the auto companies, especially car sales, for the month of June disappointed the market. This along with the negative shock from the June factory PMI (Purchase Managers' Index) which came at 55.3% compared to the 57.5% in the previous month, triggered profit booking in the last trading day of the week.
The last week rally was tremendously contributed by the FII buying. They remained net buyers for the last week for Rs. 4600.60 crore, taking the net investment for the whole year to Rs. 2053.50 crore.
Going forward, the trend is likely to remain upbeat, especially if FII inflows remain healthy and corporate earnings are solid. Monsoon could play spoilsport but may not have a big impact on the sentiment as the momentum is pretty strong.
It would be interesting to see if the Nifty is able to surpass 200-DMA (~5750). At least on Friday, it looked like the market was taking a well-deserved breather after a six-day rally. In the near-term, the Nifty might trade in a range of 5500-5750.
Monetary policy will be in focus next week as central banks in Australia, UK and Eurozone meet to discuss the latest economic conditions. A report on US non-farm payrolls will also be on the radar of global investors.
