Weekly Review: Markets up 2%, IT and Bankex advance

Markets ended the week on a positive note with 2% gains outperforming the Asian peers after Europe pledged to bail out Greece and decline in crude prices tempered inflation fears.

The benchmark Sensex shed around 360 points and touched a low of 17,314 during the early part of the week on speculations related to changes in the Indo-Mauritius tax treaty. Markets remained subdued mid-week as investors turned to the sidelines after Indian Metrological Department reduced the Monsoon forecast. But positive global sentiment after resolution over Greece crisis and fall in oil prices helped the Sensex erase all the early week losses.

The Sensex regained the 18,000 mark and closed at 18,241, up 513 points and the S&P CNX Nifty ended at 5,471, up 151 points. Both the benchmark indices were up 2% on weekly basis. This was the first weekly gain after two consecutive weeks of losses.

Markets across the globe were under pressure following Federal Reserve Statement that the economic recovery was losing steam. However global indices recouped all the losses and ended the week on upbeat note after European Union and the International Monetary fund agreed for a five year austerity plan to avoid Greece from getting bankrupt.

Furthermore, while the US Federal closed the spigot of quantitative easing two, the International Energy Agency (IEA) in a span of few days decided to open another spigot. The IEA said they would release 60 million barrels of oil reserves within a month causing Oil prices to tank 4% overnight.

Hong Kong's Hang Seng Index rose 1.9%, to 22,172; clocking 2.2% gains for the week. South Korea's Kospi added 1.7%, to 2,091, part of a 2.9% increase for the week. Japan's Nikkei Stock Average ended 0.9% higher, at 9,679, climbing 3.5% over the week.

Sanjeev Zarbade, Vice President-Private Client Group Research from Kotak Securities said that Friday’s rally was on account crude prices falling and short covering. “If crude prices soften for the next few days, then the market may add to its gains. Also policy related moves by the government and good monsoon may lift the markets going forward,” added Zarbade.

However, the Empowered Group of Ministers decided to take a bold step of raising diesel prices by Rs 3 per litre, kerosene by Rs 2 per litre and cooking gas by Rs 50 per cylinder which may further stoke inflation and prompt the Reserve Bank of India to continue with its tightening regime. Analysts said this development will weigh on the markets going forward.

Next week Oil Marketing Companies may be on the radar after the government decided to boost the finances of the oil firms by cutting import tax on petrol and diesel to 2.5% from 7.5%. The government may lose tax revenue of Rs 45,000 crore.

From the sectoral indices IT index was the top gainer, up 3% after concerns in Europe eased. Wipro and Infosys added 3.5%, and TCS was up 2.3%.

BSE realty index was the biggest loser this week - dropping 5% to end at 2,001. Peninsular Land crashed 16% to Rs 45. Anant Raj Industries and Unitech slumped 10% each to Rs 61 and Rs 30, respectively. Among other big losers were HDIL, Ackruti City and DLF. However, Sunteck Realty gained 5% at Rs 303. Parsvnath Developers, Godrej Properties and Sobha Developers added 3% each.

Buying interest also emerged in the beaten down banking stocks as they were available at cheap valuation. Gopal Agrawal, Head of Equities from Mirae Asset said that banking shares were trading at 12-13x FY12 P/E (Price to Earnings) Multiple and some value was emerging in these stocks. Axis Bank climbed 4%, State Bank of India was up 3.5% and ICICI Bank added 3.3%.

Consumer Durables stocks which were outperforming for the past few weeks were the top loser, the BSE Consumer index lost 3% during the week. Bajaj Electricals fell 6%, Titan Industries lost 4.9% and Gitanjali Gems was down 2.6%.

Broader markets underperformed the Sensex, the BSE Smallcap index lost 3.1% and BSE midcap index declined 1.5%.

From the midcap space GTL slipped 68%, GTL Infra lost 46% and S Kumars lost 18% on concerns that financiers’ may have sold pledged shares.

Among the smallcap shares Shree Ashtavinayak was down 17%, DQ Entertainment and Hanung toys lost 14%.

Top gainers on the Sensex were Hero Honda, up 8%, HDFC gained 4.4% and Mahindra & Mahindra, up 3.5%. Main losers were Reliance Industries, down 8.7% after reports that Oil Ministry may have favoured the oil & gas conglomerate for increasing output from KG D6 basin. Maruti Suzuki was down 4% and DLF shed 3.5%.