Weekly market update 17th April: FIIs pull markets higher

>> Friday, April 17, 2009

Eight consecutive days of gains on the BSE were interupted by a 3% downward correction on Thursday but despite this the markets continued their advance with another week of  gains on both the headline indices. The Sensex ended the week on 11,805, up 218 points or 2% from the previous week.  The Nifty made a more modest gain of 1.3%, ending the week on 3,384 or 42 points higher.

Volumes again grew week-on-week and FII inflows continue to be positive, with 1,400 crore of net purchases being made on Monday and Wednesday alone (the markets were closed on Tuesday). The begining of  April has now seen 7 striaght sessions of positive FII inflow and 3,000 crore of net purchases so far. This figure is higher than for any full month since Feb 2008 and has provided much needed impetus to the rally as domestic institutions have relaxed their buying slightly.

The major movers this week have been the metals infrastructure and auto stocks, advancing heavily on Monday and Wednesday and correcting heavily on Thursday. This pattern was repeated in the Small and Mid Cap sectors which outperformed the major indices on the advances but corrected more heavily on the decline. Banks made solid gains today and will remain in the spotlight next week with HDFC and Axis reporting their results on Monday and Yes Bank also expected to release their numbers next week.

The big corporate news this week was the acquisition of a controling stake in Satyam by many people’s outsiders Tech Mahindra. The stock rallied following the announcement but has since fallen off as the market waits to hear more about management plans to inegrate their massive but ailing new business. Also in the IT space, Infosys reported slighlty below expectation figures for Q409 and expressed the belief that IT and offshoring budgets will be reduced at many of their clients  in FY10. This gloomy forecast is putting pressure on the sector as a whole.

Looking forwards we are now in earnings season proper so the market will once again become driven by domestic news. Although the rally appears to be going strong, the risk to the downside is probably greater than the upside in the short term as disappointing results from some of the bellweather stocks have the potential to trigger a significant correction. However the absence of such disapointments and the continued interest of foreign funds could continue to drive the markets higher.

Elsewhere the other major Asian indices also made ground this week and the Rupee ended the week up against the dollar despite advances in the US domestic markets. The Rupee has now gained 5% since the record low on March 3rd as foreign funds continue to flow into the Asian markets, weakening the US currency.  

Originally posted on moneyvidya.com