Finally, after a long bearish spell, Indian markets saw a ray of hope as the benchmark Sensex index of the Bombay Stock Exchange ended Friday with gains of 165.56 points over the previous week’s closing. The recovery looks sharp when compared with the low of 12,514.02 points it plumbed two weeks ago.
Interestingly, the gains were in contrast to how the week played out on other key Asian markets such as Hong Kong where the Hang Seng index was down 320 points, Tokyo where the Nikkei was down 236 points, Taiwan where the index was down 429 points and Malaysia where the benchmark was down 45 points. Even the main index in China, which saw some smart gains during the week, ended 82 points lower.
India outshone all its regional peers and ended on a positive note despite political instability looming large and not much support coming from the funds. Domestic and overseas funds remained net sellers in aggregate till Thursday. (Friday’s figures will be released on Monday).
The reversal of the trend and a change in sentiments can be attributed to lower-than-expected inflation numbers and a sharp drop in global crude oil prices, which eased fears of runaway growth in inflation and, thus, calmed investors, who were fretting about a further monetary tightening that would lead to a sharp hike in interest rates.
Global crude oil prices fell more than $19 (Rs813) from last week’s high of over $147 a barrel. In percentage terms, the price of crude sank almost 13% from its record high on 11 July to Friday’s session-low. That was a huge comfort to sagging sentiments as investors were gearing up to see oil at even higher levels.
A file photo of stock traders in Mumbai.The gains in India last week were in contrast to the losses in several Asian markets (Photo by: Rajesh Nirgude / AP )
Sharp gains on the US bourses following better-than-expected results of major banks and a decision of the Securities and Exchange Commission to limit certain types of short selling from Monday in the stocks of 19 major financial companies, including all major investment banks and mortgage finance firms Fannie Mae and Freddie Mac, added to the positive sentiments on global markets.
This week, the Indian market will look for further leads, but growing political uncertainties ahead of the government’s vote of confidence on 22 July will keep tabs on the momentum and may trigger some profit selling. However, on technical grounds, the market is poised to gain further after some brief profit taking.
According to a key technical study, the Sensex and the S&P CNX Nifty index of the National Stock Exchange may gain for two weeks before the rally that started last week fizzles out. However, it is worth noting that gains stretching two weeks does not mean the markets will gain on all the days of the week. It means that both indices are likely to close this week and next higher.