Weekly Review: Markets surge on economic reform hopes

RBI policy, FDI in retail take markets higher by 2%

Markets rose for the third consecutive week on the back of a range of of economic reforms announced by the government recently. The Sensex jumped 288.56 points or 1.56% to 18,753 - its highest closing level in oevr a year. Nifty added 114 points to 5,691.

Monday's RBI policy review saw the Sensex ending marginally higher, as the central bank maintained neutral stance on key policy rates. Markets slipped on Tuesday as inflation went up 10% for the month of August. Thursday's nationwide bandh against the the government's decision to open up foreign direct investment in the retail sector, took markets lower once again. However, on Friday markets soared to end at their highest closing levels since July 2011 after the government stuck to its commitment to continue with the reform process.

Back home, taking a cautious stance, the Reserve Bank cut CRR by 0.25% - the percentage of deposits banks keep with central bank - but refrained from reducing lending rates in view of high inflation. The RBI decision, which came days after a slew of measures taken by the government to push growth, will release Rs 17,000 crore of primary liquidity into the system.

Moreover, soaring vegetable prices pushed up the retail inflation to double digits at 10.03% in August, up from 9.86% in the previous month. According to the Consumer Price Index (CPI) data, the highest rise in prices was for vegetables which recorded, an increase of 20.79% during the month.

BSE realty index was the biggest sectoral gainer and added 8.8% at 1,777. Bankex, capital goods and auto also outperformed the benchmark index. Broader markets advanced around 2.5% each. However, on the other hand, BSE IT index shed 3.5% to 5,982 on a stronger rupee. Healthcare and FMCG indices also slipped in trades.

Jindal Steel surged 14.6% to Rs 427 and was the top gainer this week, as the stock recovered from a recent slide.

Larsen & Toubro added 6.5% to Rs 1,584. The company has restructured its IT and L&T Integrated Engineering Services businesses with a view to accelerate growth in the technology space. L&T Infotech has been reorganised around two business clusters, "industrial" and "services".

SBI gained 12% to Rs 2,213 following its decision to revise downwards its Base Rate by 25 basis points (bps) from 10% per annum to 9.75% per annum effective from September 20, 2012.

BHEL jumped 13.5% at Rs 232 after the company clarified that the ongoing controversy over coal allocation for power plants would not have any impact on its operations.

Shares of power related companies were in limelight on the bourses on reports that the government is likely to clear to restructure the debt of state electricity boards (SEBs) and power distribution companies (discoms) to revive the ailing sector. Tata Poweer added 5% to Rs 103.

TCS announced the official opening of the TCS Solutions Center - Minneapolis in Bloomington, Minnesot, earlier this week. Shares of TCS, however slipped 7.7% to Rs 1,303 as IT shares in general dropped this week.

Index heavyweight Reliance Industries ended flat st Rs 850. Kotak Securities has downgraded Reliance Industries (RIL) to sell recommendation attributing lack of reason for stock’s run up in the past week.