Friday, November 05, 2010
It was a Diwali bonanza for stock market investors as the key benchmark indices scaled record closing highs during the special 45-minute Muhurat trading session held today, 5 November 2010, to mark the begging of the Samvat Year 2067. After a strong start, the market pared gains. Index heavyweight Reliance Industries (RIL) and Larsen & Toubro reversed initial gains. Another indecx heavyweight ICICI Bank also pared gains. The BSE 30-share Sensex jumped 111.39 points or 0.53% to 21,004.96, off close to 100 points from the day's high. All the sectoral indices on BSE were in green. The market breadth was strong.
India's food inflation, based on the annual Wholesale Price Index (WPI), eased in the penultimate week of October, Government data showed. However, food inflation is still pretty high, justifying the RBI's decision this week to hike policy rates for the sixth time this year. Inflation for the Food Articles group stood at 12.85% in the week ended October 23, lower that the previous week's annual rise of 13.75%, the Commerce & Industry Ministry said today. Inflation in Food Articles group was at 12.87% in the year-ago period. The index for Food Articles group declined by 0.2% to 179.1.
The main indices flirted close to their highs in Oct ’10 but sudden tapering of FII flows coupled with continuous selling by local funds put the brakes on the bulls. The earlier years have been more dramatic from the indices movement point of view. If you recall in Oct ’08 the BSE Sensex was hovering around 9,000 levels. This was the time the global markets were hit by the collapse of Lehman Brothers. The worldwide financial meltdown was followed by one of the worst recessions in several decades. A year later the Sensex staged a turnaround and rose to a 17-month high around 17,500. At present the Sensex is around the 20,800 levels, near a 33-month high. The rise from Samvat 2066 till this Diwali has seen some swings but in terms of gains the Sensex has added ~18%. From 17,000 levels last Diwali, the Sensex fell to a low of 15,330 in Nov ‘09 and hit a high of over 20,850 in Oct ’10.
It was Diwali Dhamaka on the street as investors seem to have shrugged off the latest rate hike by the RBI and at the same time cheered fresh monetary stimulus from the US Federal Reserve. Coal India's phenomenal listing was the icing on the cake, coming as it did on the eve of Diwali. A premium listing was always expected but a close at Rs 342 was not really anticipated. With Thursday's stunning rally, the key indices are once again within striking distance of the all-time highs. So, naturally all eyes will be glued on the trading screens to see if they can advance further and touch new historic highs. If world markets are supportive the Sensex and the Nifty may well scale new peaks. That's the happy thought we would like to leave you with.
Wish you a happy and prosperous New Year.
The Federal Reserve announced plans to pump hundreds of billions of dollars into the US financial system in yet another unconventional effort to try and jolt the US economy out of a deep slumber. The Fed will, in effect, print money to buy Treasury bonds worth an additional US$600bn by June 2011 in a bid to lower long-term interest rates and avoid deflation. The action should make it cheaper for Americans to borrow money, take out mortgages or refinance their houses, and for businesses to borrow funds in order to expand. But the big question remains whether they will take the bait or not.
The Reserve Bank of India (RBI) hiked the repurchase rate (repo rate) and the reverse repurchase rate (reverse repo rate) by 25 basis points (bps) each as part of its efforts to rein in spiraling inflation in a fast-growing Indian economy. The repo rate now stands at 6.25% while the reverse repo rate has increased to 5.25%. The bank rate and the cash reserve ratio (CRR) have been left unchanged at 6% each. The RBI left the FY11 GDP growth forecast unchanged at 8.5% while inflation target (based on new WPI series) for the current year has also been kept unchanged at 5.5%. Inflation target as per the old WPI series has been left untouched at 6%.