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The Pendulum Continues Swinging

February’s last week had only a slight gain to show

The last week of the month was eventful. The markets were closed on Monday on the occasion of “Maha Shivratri”.

After an almost flat start on Tuesday (Feb 24), the bulls came to the fore on Wednesday (Feb 25) and Thursday (Feb 26) but were pulled down on Friday (Feb 27). Sensex closed at 8892 against 8843 of previous Friday (Feb 20) making a neat gain of 0.55 per cent for the week.

Buoyancy was seen in the markets on the back of third stimulus package announced by the government. The government announced a cut in the general excise duties by 2 per cent and service tax from 12 to 10 per cent on Tuesday. This led to a rally in Auto stocks on Wednesday on the hopes of an increase in demand for automobiles and price cuts. BSE Auto delivered 3 per cent. The other top gainers of the day were BSE IT (2.52%) and BSE Metals (1.28 %).

Inflation fell to a 14-month low and raising hopes for rate cuts boost the sentiments on Thursday ending the day on a positive note. The Sensex and Nifty ended with modest gains of 0.91and 1.05 per cent respectively.

But the bulls were restricted from coming out in full force due to varied reasons. Standard & Poor downgraded India’s rating outlook from stable to negative. The reason given was the deteriorating fiscal position of India to unmanageable levels in the medium term. The lower than expected growth in GDP numbers was fuel for the bears on Friday. India’s GDP grew at 5.3 per cent for the quarter ending December 2008, against 7.6 per cent (Q-o-Q) and 8.9 per cent (Y-o-Y).

Also, the global cues hampered the bulls from taking over the markets. Though, after the Federal Reserve Ben B. Bernanke allayed mounting fears over a possible bank nationalisation plan by the Obama administration, US markets bucked the down side trend on Tuesday but failed to keep the momentum as the drop in home sales and investors worries over President Obama’s Budget would clip medicare payments to
insurance companies triggered sell-off in insurers to dampen the market sentiments.

While on Friday the news of a board meeting on March 02, 2009 to consider the amalgamation of Reliance Industries and Reliance Petroleum came in after the trading hours. This will be a major driver of market interest in the coming week as Reliance Industries and Reliance Petroleum corner 20 per cent of the Sensex weightings.