Weekly market update 17th April: markets advance for 7th consecutive week

>> Friday, April 24, 2009

A mixed week globally ended on a positive note as earnings reports in the US, Europe and domestically added some cheer to the markets. The big positives this week were Axis and HDFC whose results eased concerns about bank profitability, also Wipro beat expectations and saw a bounce in their share price towards the end of the week.

Following a stuttering start to the week, caused by weak global cues, the markets rallied on Thur and Fri to leave the Sensex on 11,329, a gain of 305 points or 2.8%. Meanwhile the Nifty advanced 97 points to close on 3,481. 

This marks the 7th consecutive week of advances and the Sensex is now 39% higher than the previous closing low of March 9th. Admittedly this still leaves it 46% below the highs of Jan 2008, but the pace of the gains has made India oneof the best performing markets during the recent rally, outperforming all of the major global indices.  

Although the cyclical sectors such as infrastucture, banking and auto are still benefiting from the increase in optomism, the sporadic release of Q4 results means that the advances are less sectorially defined than early on in the rally. 

FII inflows have reduced from the levels seen in previous weeks but remain positive which has caused speculation that the rupee may  contiune to advance against the dollar as demand is fuelled by the bouyant stock market. For the first time in 12 months the Rupee is trading close to its 100 day average price ($49.60) with analysts predicting a possible rapid appreication if this level is breached.

With the current rally having overshot the expectations of almost every analyst, opinion is divided regarding the outlook for the next few weeks. On some levels there appears to be strength left in the rally but for every week that passes without a serious correction, the downside risk grows larger. 

Those with a long term horizon continue to accumulate stocks, benefiting from the historically cheap valuations;  the Sensex is currently trading at approximately 12x reported earnings, well below the 5 year average of 17.7x. However those with a shorter term view remain cautious as the markets continue to climb.

Post originally published on moneyvidya.com