Sensex jumps over 495 points this week:: Business Line

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A host of positive factors kept the mood in the stock market upbeat for the fourth straight week with the biggest weekly gaining streak since September 2010, sending the benchmark Sensex up by another 495 points to end at over 11-week high of 17,233.98.

Sensex gained 1,779.60 points or 11.51 per cent in the fourth straight week as also in the current month, between January 2 and January 27, 2012.

Buying was seen across-the-field as barring realty, other 12 sectoral indices closed with sharp to moderate gains between 5.64 per cent and 0.71 per cent, while 20 out of 30 Sensex-based scrips registered increase in their values.

Monetary policy review

The first day of the week saw some lacklustre activity but on the second day investors’ confidence surged after the Reserve Bank of India, in its third quarter monetary policy review, cut the cash reserve ratio (CRR) by 50 basis points to infuse liquidity in the system, keeping the short-term lending rate unchanged.

The move will pump Rs 32,000 crore into the financial system, and gives signals of a cut in the lending rate in the near future.

FII buying

One of the main reasons behind the current gush was also the frantic buying by Foreign Institutional Investors (FIIs), the main market movers, who injected Rs 3,308.66 crore in the week (including provisional data of January 27) and Rs 9,073.10 crore in the current month till January 25, as per SEBI figures.

The last day of futures & options (F&O) contracts on Wednesday compelled operators to cover their short-positions after the RBI announced the Q3 monetary policy on Tuesday, lowering the CRR. This, in turn, boosted the market sentiment.

Food inflation

Staying of food inflation in the negative terrain for the fourth straight week at (-) 1.03 for the week ended January 14 from (-) 0.42 per cent in the preceding week too aided the investors’ confidence.

Marketmen expected that the decline in food inflation will help rein in the overall inflation and assist the central bank to cut the key lending rates in March.

GDP growth estimate

However, the central bank cut 2011-12 GDP growth estimate to 7 per cent from 7.6 per cent earlier. It expects inflation to be at 7 per cent in March.

The Bombay Stock Exchange’s 30-share indicator, although resumed lower, recovered later and registered gains for all four trading days in the week as the market was closed on January 26 for Republic Day.

The Sensex moved in a range of 17,258.97 and 16,659.32 before concluding the week at 17,233.98, highest closing since November 9, 2011 when it had settled at 17,362.10, showing a net gain of 494.97 points or 2.96 per cent.

The NSE broad-based Nifty also flared up by 56.10 points or 3.09 per cent to end above 5,200-mark at 5,204.70 after more than 11 weeks.

Capital goods, technology, auto, IT, consumer durables, banking and metal segments were at the forefront.

Second-line counters outperformed the Sensex with the BSE-Smallcap and BSE-Midcap gaining by nearly 3.4 per cent each, signalling increase in retail investors’ participation.