The volatility of August is behind us and the anxiety arising out of political wrangling in the Capital has also subsided. September should open reflecting the optimism arising out of the first quarter GDP number.
A fall in inflation numbers below four per cent for the first time in several months has given hopes about a possible reduction in interest rates. Now, all attention would turn towards the mid-September meeting of the US Federal Reserve and the effect a possible rate cut there would have on financial markets worldwide.
But it would be better to keep in mind the word of caution from the Reserve Bank of India in its annual report released last week. “Further deterioration in sub-prime delinquencies could lead to reassessment of risk by investors across products and markets and retrenchment of capital from the emerging market economies, given the contagions and herd mentality,” the report said..
FIIs had pulled out Rs 7,770 crore from the Indian markets in August and that would definitely keep the cautious mood up.
The Sensex gained 6.5 per cent, aided by strong performances from heavyweights like Reliance Industries, Tata Steel, Hindalco and Mahindra & Mahindra which gained 10 per cent. Metal stocks that took a knock in the middle of the sub-prime crisis in August bounced back to record a jump of 12.5 per cent. State Bank of India and ICICI Bank also bounced back this week, but the counters are still under watch over the government approval status of holding companies that ICICI Bank has floated and SBI has mooted.
The auto sector made a comeback with traders hoping that the festival season will spur vehicle purchases. Vehicle sales numbers for August released by Bajaj Auto and Maruti have shown the same old trend of a fall in bike sales and a growth in car sales.
Last week, the volume drivers were the stocks that have been driven by news as well as rumours. IFCI, Nagarjuna Fertilisers and Tata Teleservices dominated the volume charts. All three stocks rose to their highs last week.
The management of Nagarjuna Fertilisers has sent a note to the National Stock Exchange denying the speculation that led to a spurt in its stock, though general policy news that drove up all fertiliser stocks. It will be interesting to watch how the markets react to the denial.
Udayan Mukherjee’s column will resume from Tuesday