Weekly Report: Markets gain 2% led by rate sensitives

Markets rose 2% during the week, led by rate sensitives, on the back of declining inflation, better-than-expected industrial production and concerns over euro debt eased.

The Sensex surged 306 points or 1.9% to 16,154. Nifty ended up 2.5% at 4,866.

India’s industrial production for the month of November grew at 5.9% beating the street expectations after a sharp contraction of 4.74% in October.

Further, food inflation for the week ended December 31, 2011 came in at -2.9% compared to -3.36% during the previous week.

On Monday, markets ended flat as investors turned cautious ahead of the third quarter earnings. Markets rose on Tuesday on the back of positive cues from Asia and Europe, led by index heavyweight Reliance Industries and financial shares. The markets strengthened further post Moody's upgrade of India's rating to investment grade.

Moody's upgraded India’s short-term country ceiling on foreign currency bank deposits on Tuesday. The upgrade followed a positive rating action by Dominion Bond rating Services (DBRS). They upgraded the trend of India’s long-term foreign and local currency debt rating from negative to stable outlook in June 2011.

Markets ended flat on Wednesday as investors turned cautious ahead of the third quarter earnings which are expected to remain muted and November industrial production data. The markets traded in a narrow range for most part of the trading session.

Benchmark share indices ended lower on Thursday, shrugging of better-than-expected November industrial production data, with Infosys leading the decline after the software major cut its dollar revenue growth guidance for fiscal 2012 because of the debt crisis in Europe.

On Friday, markets rose once again on strong global cues as investors finally cheered the strong industrial output data. The Sensex surged to the week's high of 16,257 before finally ending at 16,155.
BSE realty and metal indices were the biggest gainers among the sectoral indices. Realty index soared 13% through the week to 1,581.78.

Banking and financial stocks surged on expectations that the RBI will cut interest rates at its policy review scheduled on January 24, to support the slowing economy. BSE bankex rose 6% to 10,300 through the week.

Auto stocks firmed up as car sales in India rose an annual 8.5% in December, an industry body said on Tuesday, the second consecutive monthly rise as the industry continued to rebound from record falls in sales in late 2011. BSE auto index edged up 3.5% to 8,465.

However, BSE IT index underperformed the Sensex and slipped 6.8% to 5,482 as Infosys results weighed on sentiments.

IT major Infosys reported a quarter-on-quarter growth of 25% in net profit to Rs 2,372 crore for the quarter ended December 31, 2011. In the previous quarter its net profit was Rs 1,906 crore. But the company cut its FY12 dollar revenue growth guidance to 16.4% as against earlier guidance of 17.1-19.1%.

Infosys slipped nearly 9% to Rs 2,585. Among other stocks - TCS, HCL Tech and Wipro edged down 1-7% each.

HDFC from the financial space advanced 2% to Rs 682 post results. Housing Development Finance Corporation (HDFC) reported a 10% growth in net profit for the quarter ended December 31, to Rs 981 crore as compared to Rs 891 crore recorded during the same period of the previous year. The muted profit growth, which was below street’s expectation, is due to lower gains from sale on investment.

On the other hand, Tata Steel gained 14.5% followed by Hindalco and Sterlite from teh metal space. DLF added 11%, while Larsen & Toubro, was up 8.4%.

Coal India fell during the first half of the week on reports that the Calcutta high court has asked the company not to implement the new pricing regime in West Bengal till 16 January 2012 after public interest litigation was filed. The next hearing will be on 16 January 2011. However, for the week the stock jumped 7.4% to Rs 344 after the company said the wage revision was in line with expectations and provisions have been made from September quarter.

Banking shares SBI and ICICI Bank added around 6% each while Mahindra & Mahindra, and NTPC went up 4-6% each during the week under review.

Tata Power rose by 4.6 to Rs 96.20 on reports that the company has commissioned a unit of its 4,000 mega watts (MW) power station at Mundra in Gujarat.

The markets would be looking at a slew of corporate results due for the next week - with HCL Tech, Hero MotoCorp, Bajaj Auto, JSW Steel, Axis Bank, Larsen & Toubro coming out with their numbers.