Markets with positive sentiment stay up

The domestic markets remained volatile but managed to close in the positive zone on most of the trading sessions last week. The positive developments in the US markets kept the sentiments upbeat while concerns on the Asian economy made investors nervous.

The domestic markets, in general, are in a side-way movement from the last three months after the sharp run-up seen in May. Analysts believe the positive undertones in the markets will drive them to new highs in the next few months. The rupee lost ground to the US dollar last week and is currently trading at around Rs 49 per US dollar (its 7-week low) due to a higher demand for the dollar from importers.

Crude oil remained range-bound between USD 72 and 75 per barrel during last week. On the commodities front, gold prices started going up in anticipation of demand picking up during the festival season.

Here are some significant developments that influenced the stock markets last week:

Last week saw the August F&O series expiry. The large cap indices – Sensex and Nifty remained quite volatile through out the month and ended the August series with a 2-percent gain. However, there was a good move in the mid-cap and small-cap stocks this month. This shows that mid-cap and small-cap stocks are catching up with large-cap stocks.

So high risk appetite investors can focus on fundamentally strong and liquid stocks in these sectors for a short term perspective.

On the other hand, analysts believe that large-cap stocks are in a consolidation mode from the last couple of months and there is a good chance of a move to higher levels in the coming months, as the under tone is quite bullish in the markets and positive signals are coming in from global economies.

The news from the US markets remained quite positive through out last week. During the earlier part of the week, the data related to consumer confidence and housing sales came above analysts’ expectations and it boosted the sentiments in the global markets.

Similarly, the data related to a drop in the unemployment rate also came as good news for the markets. These positive data points kept the sentiments upbeat in the domestic markets as well and helped the stocks of export-oriented sectors post a good rally.

Asian markets:

There was some volatility in the Asian markets last week. The negative sentiments in the Asian markets spread to the global markets and impacted the sentiments of investors. Some believe the Asian markets are in an over-brought zone and a deeper correction is coming in the near future. In general, this view is expected to keep them volatile in the near future.

Inflation rose more than 0.5 percent week-over-week and remained at minus 0.95 percent for the week ended August 15 (it was minus 1.53 percent in the previous week). Analysts believe these tentative numbers are not giving the right picture. Inflation is at a much higher level.

This is reflected in the revised inflation numbers for the last two months. Also, on the other hand, the inflation rates are going up quite steeply in the next 3-4 weeks as the base effect of last year will begin to fade out. Some analysts believe it won’t be long before the Reserve Bank of India (RBI) will have to reverse its soft monetary policy regime.