Markets stage recovery

Domestic markets along with the global markets closed in the green in the week gone by.

Domestic markets along with the global markets closed in the green in the week gone by. Mid and small cap stocks outperformed the broader index gains as they recouped the sharp losses in previous weeks. On Friday,BSE Sensex closed 217 points up at 19,864.85 points while NIFTY closed at 5,948.75 points,up by 56 points. Improvement in some of key US economic data like fall in unemployment benefits and rise in housing starts instilled the confidence in the global markets.

China markets gained this week as market perceived an interest rate hike by the authorities but they only hiked reserve requirement ratio. I think the inflationary pressures over their suggest that increasing reserve requirements would not solve the purpose and the hike in interest rate or may be series of interest rate hikes look imminent.

As expected RBI this time did not touched upon the policy rates and in line with its approach of maintaining optimum liquidity in the system,RBI reduced the statutory liquidity ratio SLR of scheduled commercial banks SCBs from 25 per cent of their NDTL to 24 per cent on permanent basis.

However RBI did expresse concerns on the inflation front emanating from rising commodity prices internationally and strong domestic demand. It looks that RBI may again will increase the policy rates in order to address the inflationary pressures.

Advance tax figures are suggesting for a good result season. Except cement companies all companies from sectors like banking,auto,pharma,etc saw a rise in tax outgo. Another important event to be seen next week is government stance on diesel prices. As a matter of fact oil marketing companies are losing out Rs 5 per litre on diesel.

There is a chance that oil marketing companies may be allowed to raise the diesel price partially. Any increase would get reflected in the inflation basket that has just started showing some moderation.

The writer is CMD,SMC Wealth