Markets bounce back on global & domestic spurs

After trading in the red zone for the past 4 weeks, the markets have finally managed to spur up this week and post some healthy returns on the bourses. This was despite the Q2 GDP growth coming down at a dismal 6.9%, showcasing some clear signals of a slowdown in economy growth.

Back home, the week also saw the irritability weakening, with the rupee appreciating by 1.5% to Rs 51.30 per dollar. This came as a major relief to the markets, and helped them to propel ahead. Last week, the rupee had touched its all-time low of Rs 52.78 per dollar on account of global risk aversion and FIIs pulling out of the markets. Currently, the net FII investments in equity markets for the week are at Rs 180 cr, marginally in the positive zone. This was due to some heavy buying seen on Dec 1, 2011.

In other developments, the Union Cabinet's decision to allow FDI investments of up to 51% in multi-brand and 100% in single-brand retail has come up against strong opposition from the other political parties, who have gone on to stall the Parliament's proceedings to show their dissent.

Moving back to the markets, the Metal index had an excellent week, as it bounced back up by more than 10% on the back of renewed buying in this space. Over the past few weeks, the metals space had been on the receiving end of a huge beating down by investors. The top gainer amongst the Sensex stocks was Hindalco, up by about 18%. Other prominent gainers among metals stocks were JSW Steel (up 14.39%) and Tata Steel (up 1.79%).

The interest rate-sensitive Bankex also rose by 8% this week, on the back of fresh hopes that the RBI might halt its rate hike spree in Dec 2011. SBI, the country’s largest bank in terms of market capitalisation, was up by 12% for the week as a result of this development. Federal Bank (up by 12.6%) and UCO Bank (up by 11.42%) were the other prominent gainers amongst the banking pack.

Among the losers, Pantaloon Retail was down by almost 9% over concerns on the rollback of the Retail FDI bill. CESC was another victim, and the chances of the Retail FDI policy being withdrawn has put the future of its retail business, Spencers, in the dark.

Aviation major, Jet Airways, was also down by 7.4% this week, as the aviation industry continues to struggle.

In conclusion, despite the stellar performance by the markets this week, we, at DSIJ, continue to advise our readers and the investor community at large to be cautious. We feel that this rally is not sustainable, and one must not buy into it just yet. In fact, this is a good time to book profits. The Euro-zone debt crisis still looms at large over the global economy, and any sudden or negative news flow on that front could plunge the market into the red once again.