The Hindu Business Line : Markets this week

Amid hectic political activity in the Capital, the markets on Monday closed on a cautiously optimistic note ahead of Tuesday's crucial confidence vote. Given the fluid political situation, expectation was that the markets would close in the red. On the contrary, the Sensex opened positive and, displaying volatility, tacked its way through a 300-point intra-day swing before closing 1.57 per cent higher, at 13,850.

Despite high cost pressures and a decision to hold the price line, SAIL achieved a sales growth of 37 per cent and profit at 20 per cent for the quarter ended June 2008. The stock again came into the investors radar and made decent gains.

The ruling UPA government comfortably sailed through on Tuesday, and the Congress-led alliance was able to muster 275 votes in its favour against the 256 by the combined Opposition.

This gave a big boost to stocks, as evidenced by the 1500-point gain of the Sensex over four consecutive trading sessions.

Maruti Suzuki posted a 7 per cent drop in net profit despite higher sales, mainly owing to a sharp increase in raw material prices. According to a company official, a a net loss of Rs 134 crore was expected from hedging in derivative instruments, out of which the impact for the current quarter would have been Rs 18 crore. The stock was hammered down 9 per cent or Rs 60 to finish at Rs 587.

The markets on Wednesday greeted the Manmohan Singh Government's victory with a six per cent gain in the benchmark indices, though marketmen doubted if the the rally could sustain. FIIs were huge buyers while day traders and retail investors took short-term positions, said brokers. Domestic institutions, on the other hand, booked profits.

Banking stocks soared on expected speed to the reforms process, as the sector was expected to get a fillip after the Government won the vote of confidence. The BSE Bankex surged 10 per cent as all the 16 scrips comprising the banking index ended the day with gains of between 5 and 15 per cent.

Anil Dhirubhai Ambani group (ADAG) stocks recovered smartly on short covering, fresh buying and, in some counters, growth in outstanding long positions. According to analysts, a section of the market players had pent up shorts in these counters, which were covered significantly, and an expectation that the group may find the going smoother with a "favourable" regime improved sentiment for the stocks.

The nearly 6 per cent gain for the Sensex on Wednesday appeared to be more of a gut reaction to UPA's winning the trust vote in Parliament rather than on the basis of any underlying fundamentals, said market experts. Mixed feelings dictated the uninterrupted five-day rally in the stock market, which analysts felt was far too stretched and could go bust at any time.

The annual wholesale price index-based inflation was marginally lower at 11.89 per cent during the week ended July 12, Government said on Thursday.

With the Left parties no longer in the picture and new allies coming into its fold, the UPA Government has cleared the acquisition of State Bank of Saurashtra (SBS) by SBI.

Reliance Industries' net profit for the first quarter rose 13 per cent on higher revenues and strong margins from refining, its largest business. Bottomline growth, however, was the lowest in several quarters. Since the results were announced after market hours, on Friday the stock was hammered down heavily toshed nearly Rs 160 or 7 per cent to finish at Rs. 2147.

The market euphoria over the UPA Government winning the trust vote was only for a day, and the markets retracted to its usual losing streak behaviour. On Friday, bears pounced on the bulls taking a cue from flat inflation data, weak global equity markets and serial blasts in Bangalore, and hammered the market down heavily. The Sensex lost nearly 500 points to finish at 14,275, but pared the entire gains it made during the initial part of the week.

Compiled by B.L. Sudarsan
Podcast by M.J. Madhavan and S. Vasudevan

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