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Markets Recover But Uneasy

After last week's fall, the markets rose once again this week. Nifty was up 1.54 per cent, while the Sensex gained 1.61 per cent during the week ended July 14

After last week's fall, the markets rose once again this week.

Nifty was up 1.54 per cent, while the Sensex gained 1.61 per cent during the week ended July 14. Among the broader indices, S&P CNX 500 gained 1.02 per cent, while the CNX Mid Cap ended the week down 0.17 per cent.

The sectoral indices also staged a smart recovery, the BSE Bankex being the only exception. Only the Bankex was in the negative category. It lost 2.37 per cent in the week ended July 14. Last week when all the sectoral indices were in the negative category, Bankex has generated a positive return of 0.44 percent.

Among the top gainers in the sectoral indices was the BSE IT index, which added a massive 6.3 per cent. It had lost 1.11 per cent last week. IT was followed by FMCG index (1.25 per cent), Healthcare index (0.66 per cent), PSU index (0.24 per cent) and Metal index (0.18 per cent). The Metal index was the top loser last week (-1.90 per cent).

On Monday the 30-share Sensex rose 174.77 points, or 1.7%, to close at 10,684.30, after swinging between a high of 10,704.78 and low of 10,461.73. The markets were led by strong technology, auto and cement shares. Dealers said the late recovery in key Asian markets like Japan and South Korea boosted the sentiment. The 50-share Nifty climbed 66.15 points, or 2.1%, to close at 3142. Buyers chased technology and automobile shares, but continued to shy away from banking shares, as the sector is expected to report weak numbers for the April-June quarter. Two-wheeler major Hero Honda jumped 2.4% to Rs 766.95, ahead of its quarterly earnings announcement on Tuesday. Among other key gainers in the auto sector were Maruti, Tata Motors and Bajaj Auto. Technology shares rallied on hopes of a strong guidance from Infosys Technologies. Wipro was the biggest gainer rising 5 per cent to Rs 492.40. TCS was up 3 per cent to Rs 1,801 and Infosys rose 2.8 per cent to Rs 3,190.25, while Satyam Computers rose 2.4 per cent to Rs 708.60.

On Tuesday the markets recorded negative returns, disappointed due to the lower-than-expected results by auto companies. The Sensex closed at 10,614.35, down 69.95 points or 0.6 per cent. The 50-share Nifty closed at 3,116.15, down 25.85 points or 0.8 per cent. The traded turnover on both exchanges combined was around Rs 7,280 crore compared with around Rs 7,000 crore on Monday. Hero Honda's poor result and expectations of poor margins for the rest of this financial year took toll on the markets. It was the worst performer among Sensex stocks, down 6 per cent to Rs 720.45. Tata Motors (-3.5 per cent) and Maruti (-2.2 per cent) were other big losers in the auto space. FIIs were the net sellers of equities worth Rs 47 crore on July 11. While frontline shares were under pressure, mid-cap and small cap shares found some takers. Cement shares performed well as the market was expecting a strong quarterly performance from the sector.

On July 12 (Wednesday) the equity markets shrug off the Mumbai blasts and closed around 3 per cent higher. The Sensex closed up 315.74 points at 10,930 and the 50-share Nifty ended at 3,195.90, up 2.6 per cent. Traded turnover on both the exchanges combined rose to Rs 10,500 crore, mainly driven by domestic institutional buying.

The markets gained on strong first quarter earnings and robust earnings guidance from technology major Infosys. The company led the rally of frontline shares. There were talks that state-owned institutions made large-scale purchases on Wednesday due to pressure from the government to restore investors' confidence in the wake of the blasts.

Infosys reported a 50 per cent rise in consolidated Q1 net profit to Rs 800 crore from last year. The company said it expected income to rise 40.2-40.7 per cent in 2006-07. Shares of Infosys, which led the Sensex gainers, closed 7.5 per cent higher at Rs 3,386.45. TCS gained 7 per cent, while Wipro and Satyam Computer stocks rose roughly 4 per cent each. Mutual Funds made purchases worth Rs 132.28 crore on Wednesday.

On Thursday, fears that Bank of Japan may end its zero interest rate policy adversely affected investor sentiment across Asia. Japan's Nikkei-225, Korea's Kospi and Hong Kong's Hang Seng ended about 1 per cent lower. The Sensex closed at 10,858.50, down 71.59 points, or 0.65 per cent. The Nifty ended at 3,196.30, down 26 points, after touching a low of 3,148.95. Total traded turnover on both the exchanges combined was over Rs 7,900 crore on Thursday, against Rs 10,574 crore on Wednesday. The FIIs showed some buying interest and were net buyers to the tune of Rs 375 crore.

Though the markets shrug off the Tuesday's blast but were not so perseverant so as to take various developments in its stride on Friday. Firstly, there was hike in interest rates by Bank of Japan, followed by crisis in Middle East. The bombing of Lebanon by Israel and explosions at Nigerian oil installations sent the global crude prices northwards when it crossed $78 per barrel. The combination of global factors pulled the markets down on the second consecutive day. Analysts said Japan's 25 basis point hike in interest rate may prompt hedge funds to pull out from emerging markets. Hindalco, Grasim Industries, Satyam Computer Services, Tata Motors and Wipro lost substantially on profit-booking. But selective buying was observed in stocks like Hero Honda, NTPC, TCS and Reliance Energy. There was an all-round selling, which was reflected in negative breadth of the market.

Mutual funds were net buyers of equities worth Rs 162 crore while FIIs were net sellers, offloading equities worth Rs 227 crore over the week.