The 5%-Up Week In Hindsight- Sensex regains 17k, investors cheer

 In a big data week, markets did a major turnaround, rebounding 5%. The Nifty crossed the key 5,100 barrier, ending at a strong 5,132 ahead of Reliance results, which are due to be announced on Saturday. Traders were forced to cover their shorts by the Indian culture defending Sri Ram Sena.

 

The best performer was IT, with an 8.5% gain on the back of Infosys results.

 

India's Index of Industrial Production (IIP) had another weak showing with a headline increase of just 4.1%, with various sectors slowing down considerably. The Mining index, hit largely by stoppage of work at various illegal mines, dropped 3% from last year. But if it was coming from illegal mines, production shouldn't be missed, one thinks. There is no morality in numbers.

The Telangana agitation has hurt the state GDP enormously, says Business Standard. But that is perhaps missing the point — who cares about Andhra Pradesh's GDP, when what you want is another state?

Slovakia was in the news in the battle to bailout Europe by refusing to vote for the expanded powers of the EFSF, which are required if Greece and other nations, and later the European banks, are to be rescued. But in a repeat vote on Thursday, they voted in favour, showing us that such politics is not confined to India alone.

Spain was downgraded by S&P to AA-minus. Since no one trusts anything the ratings agencies say, the markets staged a worldwide rally in celebration.

Indonesia cuts interest rates by 0.25% to 6.5% on a potentially slowing world economy. Before people start looking at the RBI, note that they were able to get inflation down to 4.61%. Inflation in Europe rose to 3% on higher energy costs, but dipped slightly in China to 6.1% which analysts say is still too high.

September Inflation for India came in at 9.72%, a tad lower than the 9.78% in August. RBI said this was still too high, and later 10 year bond yields shot up to 8.81%, the highest in 37 months. Chances are that RBI will raise rates again as inflation is way beyond comfort levels.

 

October's second bond auction failed this week, after a smaller failure last week. The 2018 and 2021 bonds fell short by about 4,000 crores, out of the 10,000 crores the government expected to raise from the auction. The failure of a benchmark 10 year bond to get enough support at the cut-off yield of 8.78% indicates that the market is very nervous about rate hikes, and continued government borrowing.

FIIs pumped in more than 2,000 cr. in the week, but for the month of October are net sellers, having sold similar quantities of stock in the first three trading days. For Friday, FIIs and DIIs were both net sellers, leaving traders wondering if the upsurge has met with buyer fatigue.

 

The rupee stayed at the Rs. 49 level to the dollar, not yet breaching the magical 50 barrier.

Exports grew over 52% in the April-September timeframe to $160 billion, while imports went up 32% to $234 billion. The trade deficit for the first six months of the year was $73.5 billion.

Stock News

SBI plans to raise 5,000 cr. through a rights issue by March. This isn't likely to help the bank much, as it will need more than 25,000 cr. just to get its ratios looking decent.

Infosys results beat street expectations, growing revenues 8% quarter on quarter and 10% year on year. The stock went up about 7%, which more than retraced the 3.5% loss on the day before, when traders dumped the stock in anticipation of poor earnings. The stock lost 4% on results announcements last quarter, and nearly 10% on the result day in January; the markets were spooked this time. Surprise, surprise.

Moneylife's article on the stink coming from Dhanlaxmi Bank. The stock dropped 10%. The news is that they are starting at the abyss in terms of NPAs, not doing proper accounting and showing higher profits by amortising costs shadily. The bank has refuted the charges and on the subsequent day the stock moved back up 5%.

Maruti has major trouble at the Manesar plant, with striking workers taking over possession of the unit and totally halting production. The High Court asked workers to vacate the premises, an order they are defying. The automaker's woes have compounded as it faces off against the Hyundai Eon which for the first time, has entered the ultra-low cost segment.

 

ONGC Videsh Limited (OVL) signed two deals — in Vietnam for co-operation in oil exploration and withKazakhstan for 25% of an oil block. China has earlier threatened ONGC with action if it continues to explore what it calls disputed territory.

Brazil wants the Tata Nano, they say. Which should be good for the company, as the car is simply not selling in India, with just  2,400 units selling in September.

Tata Coffee's shares moved up in anticipation of a deal with Starbucks, the international coffee chain. Something's brewing, and the markets like it — 14% higher.

Raj Rajarathnam, a hedge fund manager recently convicted of using insider information to illegally benefit, has been sentenced to 11 years in prison.

Finally, a list of the winners and losers of the week:

 

Next week is big on results, with many of the Nifty and Sensex stocks announcing their September 30 numbers.

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