Sensex plunges 5000 points in CY2011

Review of the Week ended 30th Dec 2011.

The markets have yet again plunged into the red zone in the last trading week of 2011. Plagued by an array of global and domestic concerns, ranging from near recessionary scenario in the developed western powers to inflationary pressures in the emerging markets, Indian markets lost nearly 25 per cent of their value this year and have been the worst performing.

As for this week, the spotlight was on the logjam in the parliament over the Lokpal Bill. Even though the bill was passed in the Lok Sabha, it failed to attain the constitutional status that has been taken on a negative note by the markets.

In other developments, food inflation for week ended Dec 13 cooled off further to 0.42 per cent as against 1.8 per cent in the previous week but it failed to bring any cheer to the markets. This cool off was on the back of a decline in the prices of essential items like vegetables, onion, potato and wheat. The Primary articles inflation also eased off to 2.7 per cent for Dec 13 as against 3.78 per cent in the previous week. Now this set of latest inflation data showing clear signs of easing out spells out some optimistic expectations of a cut back in rates by the RBI going forward.

On the global front, the US markets witnessed another decent week as equities extended their rally after a string of unexpectedly strong economic data. Investors cited recent improvement in U.S. economic data and seasonal factors behind the move.

Global commodities also saw some action this week as gold and silver futures plunged by 2 per cent and 4 per cent respectively as investors flocked towards the dollar as a safe investment bet and shunned them. 

Moving on, among the sectorial indices, the oil & gas was the top looser for the week as it plunged by 5 per cent on the back of some heavy selling seen in RIL. Interest rate sensitive FMCG, Bankex, Realty and Auto were amongst the other top losers, while the IT sector was the lone gainer on the back of some renewed buying due to a depreciating rupee.

Among the top losers, were the some prominent banks like IFCI, UCO, Kotak Mahindra, IDBI and Bank of Baroda as investors expect the Dec quarter to be a weak one for PSU banks judging by the advance tax collections.