The market ushered in the New Year with a bang as both the key indices, Sensex and Nifty, continued their bull run for the second week in a row and attained their highest levels in nearly two years on the back of US budget deal and positive growth in service and manufacturing sectors in the country.
The market resumed trading on a cautious note after investors decided to play safe as US lawmakers were trying to reach a pact to avoid the 'fiscal cliff' of over $600 billion in spending cuts and tax hikes.
The US Senate approved an agreement on Tuesday to help the world's biggest economy avert the fiscal cliff.
The deal boosted the world stock markets, including the Indian bourses. The proposal would extend tax rates on annual household income under $4,50,000 and postpone automatic spending cuts for two months.
Barring FMCG index, which closed in the red, other sectoral indices gained between 0.96% and 5.19% during the week with realty, PSU, oil & gas and consumer durable leading the pack.
The Bombay Stock Exchange 30-share barometer showed a weak trend on the first day of the week, but then went on a gaining spree to settle up 339.24 points, or 1.74%, at 19,784.08, a level not seen since January 6, 2011.
Similarly, the wide-based S&P CNX Nifty of the NSE spurted by 107.80 points, or 1.82%, to settle above 6,000 level for the first time after two years at 6,016.15.
State-run oil companies gained on hopes that a proposed revision in the Government's pricing formula would boost gas prices.
Additionally, Oil Minister M Veerappa Moily has allowed RIL and Cairn India to explore for oil and gas within the producing fields subject to certain conditions.
Besides, India's manufacturing sector growth improved further in December, registering the fastest pace in 6 months, driven by a strong pick up in new orders, an HSBC survey said.
With manufacturing PMI (Purchasing Managers Index) up and prices trending down, experts said data augurs well for the economy.
"PMI data suggest that the manufacturing sector, after stabilising between July and October, began to improve from November, and inflation pressures remain under check," said Sonal Varma, India economist, Nomura.
Finance minister P Chidambaram on Wednesday said that the Government is considering steps to reduce gold import by making it more expensive. The yellow metal is a major constituent of India's rising current account deficit (CAD).
Traders said moves to stem gold demand are structurally positive for the economy's fiscal health.
The global markets began 2013 with gains as all major bourses in the world ended the week on a positive note.
The positive sentiment was generated by the agreement reached by the US lawmakers to avert a financial crisis.
Second-line stocks outperformed the Sensex (which gained 1.74%). The BSE Small cap and Mid cap indices ended with weekly gains of 3.72% and 3.12% respectively.
"Market is on right course of recovery. Reforms, passing of few important bills, huge FII inflow have kept market ticking on upside. Expected rate cut is keeping the hope alive. However after a vertical run from 4500 to 6000 plus I do not think to the journey is smooth as large section of the media believes. I see Nifty at the most can test 6130 6150 in this settlement and not beyond that," Mr. Kishor Ostwal, CMD, CNI Research Ltd said.
"If Nifty falls below 6000 then we can see Nifty tailing back all the way to 5850 - 5820 which should be a shock for traders. Earning season is starting from 11th of Jan and there may be cases of some out performances. Since stock market fully factors in the results the stock prices corrects only on sharp disappointments and rise only on extra ordinary out performance," he added.
Overall, 26 out of 30 sensex-based scrips closed with sharp to moderate gains while others finished with losses. ONGC was the top gainer with a rise of 7.11% followed by BHEL 6.57%, GAIL India 5.40%, SBI 4.50%, ICICI Bank 3.50%, Dr Reddy's Lab 3.38%, Bajaj Auto 3.17%, Wipro 3.07%, Maruti Suzuki 2.92%, Jindal Steel 2.82%, Bharti Airtel 2.75%, Sterlite Ind 2.65%, TCS 2.54%, HUL 2.51%, Coal India 2.50%, RIL 2.43%, Hindalco 2.43%, Tata Motors 1.82%, M&M 1.69% and Tata Steel 1.18%.
Among sectoral indices, the BSE-Realty spurted by 5.19%, BSE-PSU by 4.20%, BSE-Oil&Gas by 4.06%, BSE-CD by 3.48%, BSE-Power by 2.57% and Bankex by 2.54%.
The total turnover on the BSE and the NSE was up at Rs. 11,432.15 crore and Rs. 52.712.07 crore from last weekend's turnover of Rs. 8,780.72 crore and Rs. 40,379.64 crore.
Foreign Institutional Investors (FIIs) continued their buying spree and they pumped in Rs. 5,685.01 crore during the week, including provisional data of January 4.
Forex: Rupee washed out all of its last week's gains, depreciating by 30 paise to settle at 55.07 against USD following dollar demand from importers and some banks after mid-week amid firm dollar overseas on speculation that some US Fed officials are not in favour of continuing the bond-buying plan.
However, strong domestic equities and sustained capital inflows, restricted the fall, a forex dealer said.
At the Interbank Foreign Exchange (Forex) market, the local currency commenced the week a tad higher at 54.76 a dollar from last weekend's close of 54.77 and improved further to a three-week high of 54.27 on Wednesday on dollar selling by exporters and firm dollar overseas.
However, it turned negative after mid-week on renewed dollar demand from oil importers and some banks on hopes of further rise in dollar value after US lawmakers clinched a last-minute deal to avert the so called "fiscal cliff" for the time being.
It later logged a low of 55.17 before concluding the week at 55.07, showing a fall of 30 paise or 0.55%. Last week, it had risen by 29 paise or 0.53%.
Sensex spurted further by 339.24 points or 1.74% while Foreign Institutional Investors (FIIs) injected USD 828.67 mln in the first 4 days of the week.
Pramit Brahmbhatt, CEO, Alpari Financial Services (India) said,"The INR after a stronger open, fell back towards the midweek, breaching the previous 4 week lows in the last 2 days of the week. Major weakness of over 1% has been witnessed on the last day of the week."
"The first week of the new year witnessed sharp swings on both the side. The week posted some major half year economic numbers of national accounts and the twin deficits which widened further forcing the government to take stern action to contain it around targeted levels. The government has proposed to increase the fuel and cooking gas prices to cut down on fiscal deficit and raise import taxes for Gold thereby cutting down on the trade deficit where the precious metal constitutes to be a major composition along with oil products," he added.
"High fiscal as well as current account deficit pointed towards burgeoning demand for dollars in near future which can even push the INR below its historical lows if not controlled. The equity and high yielding currencies rebounded from their lows while most of them ended the session on positive note thereby erasing some loses in INR on DGCX. The importers demand at lower levels arrested gains in INR but the hopes of rate cut action from RBI and exporter selling at higher levels continued the weakness in INR. A dip towards 54.50 levels shall be ideal to start covering the dollar payments," he further commented.
The RBI fixed the reference rate for US dollar and euro at Rs. 54.8458 and Rs. 71.5405 from Rs. 54.8473 and Rs. 72.6298, respectively, in the last weekend.
The rupee premium for the benchmark 6-month forward dollar payable in June closed the week at 167-1/2-169 paise.
Far-forward contracts maturing in December ended at 309-1/2-311 paise.
The rupee improved further against Pound Sterling to end the week at 88.21 from preceding weekend's level of 88.31 and remained firm against the euro to finish at 71.59 from last weekend's level of 72.16.
It, also shot up against the Japanese yen to close at 62.40 per 100 yen from 63.51 last weekend.