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Sensex Sets New High

Indian markets shrug off oil price rise and the US Fed rate hike to touch yet another record high

It was yet another record week for the Indian stock markets. The BSE Sensex gained 0.17 per cent, while the S&P CNX Nifty rose 0.01 per cent. Mid-caps continued on all cylinders, with the CNX Midcap closing 1.52 per cent higher. The broadbased S&P CNX 500 went up 0.35 per cent.

The market opened weak on Monday after a small fall on Friday, but by afternoon the fall gathered momentum. By the end of the day, the Sensex closed 148 points lower than Friday. With fear of rising interest rates at the US Fed meeting, the banking sector came under fire. On Tuesday, sentiment remained negative. The Sensex fell another 10 points from Monday's closing levels. Weak global markets and rising oil prices were largely responsible. The previous day the US Federal Reserve raised its key interest rate by 0.25 per cent to 3.5 per cent, which was in line with expectation. On Wednesday, with lower crude prices and a positive close in the US brought optimism among Indian traders. The BSE Sensex closed 134 points higher. On Thursday, the markets continued with the rising streak as the Sensex gained 87 points, covering up comfortably for the fall on Monday and Tuesday, and to close at an all-time high of 7816 points. On Friday, the Sensex hit a record intra-day high of 7861 points, but closed at 7767 points, 49 points below Thursday.

Crude oil prices are at record high, touching $66 by the end of the week. The ministry of petroleum said that all the four PSU oil-marketing companies would become sick under the BIFR norms, if petroleum product prices do not rise. These companies are sitting on mounting losses and they are eroding their reserves. IBP's net worth would turn negative within the next two months followed by BPCL and HPCL, which will turn sick next year. Even Indian Oil would turn sick in another three years if prices are not raised.

In other major news, Reliance Industries has found gas in Madhya Pradesh. Bharti Tele announced that it would outsource its call centre operations to Hinduja TMT and Mphasis BFL. Tata Tea said that it was planning more overseas acquisitions, specifically in North America and South America. The company has set aside Rs 500 crore for the purpose.

In sectoral indices, BSE Metal and BSE Healthcare gained the most at 3.56 per cent and 2.28 per cent respectively over previous week. Steel scrips have done well on expectations of a price rise in September and top healthcare companies-Ranbaxy, Dr Reddy's and Glaxo gained. BSE FMCG Index too rose 0.69 per cent. The BSE PSU Index, which has oil companies as heavyweights, fell the most by 0.81 per cent. Information technology stocks were not much in favour and the BSE IT Index lost 0.41 per cent. With rising US interest rates, banking stocks came under pressure, but recovered at the end of the week to close only 0.2 per cent lower.

Foreign institutional investors bought shares worth Rs 1244.5 crore. Mutual funds too were net buyers for four days between August 8-11, investing Rs 244.78 crore.

Outlook
Equity markets have gone up for 15??? weeks in a row. Volatility and price swings have become the order of the day. Indian markets seem to have shrugged off the US interest rate hike and rising crude oil prices so far. If FII buying slows down significantly or goes negative, we may witness the correction that everyone is waiting for this week.