Markets ignore Fed tapering

FII buying, RBI leaving interest rates unchanged also helped

The benchmark S&P BSE Sensex spurted by 364 points during the week ended December 20 on almost across-the-board buying triggered by frantic foreign fund inflows amid status quo stance taken by RBI on key interest rates.

On Friday, the 30-share index spurted by 371 points on sharp rise in heavyweight Reliance Industries, whose stock flared up after the government allowed the company, with some riders, to increase price of its natural gas from April.

The market lost 151 points on Thursday in a knee-jerk reaction to US Federal Reserve’s decision to taper its monthly bond buying programme starting next month. It bounced back smartly the next day.

According to brokers, the market had already factored in the much-awaited announcement about stimulus roll-back.

IT stocks rose as Fed’s decision to slow the pace of its bond purchases boosted investor confidence about economic recovery in US, the biggest market for Indian infotech firms.
Shares of healthcare, realty, auto, refinery and power also firmed up on good buying support.

Small and mid-cap shares moved up on renewed demand from retail investors and outperformed the Sensex.

Foreign institutional investors bought shares worth a net Rs 6,178.29 crore during the week, as per SEBI's data, including the provisional figure of December 20.

Meanwhile, wholesale price inflation rose to 14-month high of 7.52 per cent in November. According to the government data released last week, retail inflation soared to nine-month high of 11.24 per cent and factory output shrank 1.8 per cent.

Jignesh Chaudhary, Head of Research, Veracity Broking Services, said, “Trading started this week on a flat note, tracking the negative growth figures and high inflationary numbers which were released last week. The trend continued for the second day also as market came under more selling pressure anticipating rate hike by RBI and Fed's action on the tapering process."

"But surprisingly, despite high inflation, RBI decided not to raise interest rates, giving much needed cheer to the market. The market was also supported by strong buying from the FII community,” Chaudhary added.

Among the S&P BSE indices, IT firmed up 5.79 per cent, HC 5.25 per cent, Realty 4.96 per cent, Teck 4.86 per cent, Auto 2.68 per cent, Oil&Gas 2.52 per cent, Power 2.21 per cent and CG shot up 1.98 per cent.

The total turnover at BSE and NSE rose to Rs 11,772.25 crore and Rs 60,818 crore respectively as against last weekend's level of Rs 9,744.50 crore and Rs 53,922 crore.