The stock market this week will continue to feel the ripples of Lehman Brothers’ bankruptcy and Merrill Lynch’s distress sale, though it brushed aside these worries last Friday by posting a smart over 700-point gain, say analysts. The first half of the week may see the market continue with the gaining trend, but in the later part, it is likely to come under pressure.
The benchmark Sensex on Friday staged an impressive rebound rally to close the week on a high note after shedding over 1,000 points in the preceding days.
“Markets are likely to remain uncertain this week as investors and traders have not yet digested the global news and still have to understand the repercussions of it. The volatility is expected to continue until the situation in the US stabilises,” SMC Global Vice-President Rajesh Jain said.
After falling below the 13,000-level during the past week, reassurances of sound economy and healthy banking system from Prime Minister Manmohan Singh and Finance Minister P Chidambaram made investors to pitch for hectic buying, making the Sensex rally across the 14,000-mark on Friday.
“Even if the housing bubble has not completed its full course, its impact will gradually reduce. It is possible that domestic markets may come back to normal levels of volatility within a few weeks,” Bonanza Portfolio President (Research) P K Agarwal said.
Interestingly, banking stocks, including HDFC Bank, Kotak Mahindra Bank, PNB and Yes Bank, also saw their market valuations swell. Kotak Mahindra Bank was one of the biggest gainers with an increase of Rs 1,760 crore in its market-cap, while Axis Bank gained over Rs 570 crore, Bank of Baroda Rs 500 crore and Yes Bank about Rs 132 crore.
However, the two largest lenders in the country — State Bank of India and ICICI Bank — could not make it among the gainers as their stocks witnessed a plunge due to their exposure to the bankrupt Lehman Brothers.
Surprisingly, the country’s largest private sector housing finance company, HDFC, gained over Rs 3,000 crore in market-cap in the past five trading sessions. Its market-cap stood at Rs 65,613 crore on Friday last as against Rs 61, 934 crore at the end of the week before that.
