Sensex rises 4% this week; all eyes on ECB policy impact

A surge on two days (Tuesday & Friday) ensured a stellar rise of 4.06% for the S&P BSE Sensex during the week.

It rose 1.85% on Tuesday and 1% on Friday. The Friday's rise was due to the European Central Bank's (ECB's) announcement that it will buy bonds worth 60 billion euros per month to stimulate European economies.

Among sector indices, the S&P BSE Auto rose 1.51% during the day, followed by the S&P BSE Realty, which went up by 1.48%.

Dipen Shah, head, Private Client Group Research, Kotak Securities, says, "One notable feature of the week was the stark under-performance of mid-caps with the mid-cap index rising just 1%. FII (foreign institutional investor) inflows were buoyant and lent adequate support."

Among group A companies, top gainers during the week were Sun Pharma Advanced (65.67%), India Cements (21.26%), HDIL (21.17%), TV18 Broadcast (20.34%) and Shree Cement (19.72%). The top losers were Rasoya Proteins (-19.35%), PMC Fincorp (-17.90%), M&M Fin.Services (-15.67%), Kailash Auto Fin (-12.72%) and Ipca Laboratories (-12.65%). Despite the benchmark index moving up, out of 4,195 companies that trade on the BSE, 106 remained unchanged, 1,115 rose and 1,821 fell. FIIs were net buyers.

They bought shares worth Rs 592.79 crore on Thursday. On the other hand, domestic institutions were net sellers. They sold shares worth Rs 578.53 crore, as per the provisional data from stock exchanges.

Vinod Nair, head, Fundamental Research, Geojit BNP Paribas Financial Services, says, "The ECB's massive QE (quantitative easing) bodes well for the fight against deflationary forces in the euro region and taking growth to intended levels. Considering recovery in the US, the ECB's QE package has increased optimism over improvement in global demand, albeit at a slow pace."

Also, apart from QE's effects on the health of the global economy, the ECB's action will dictate liquidity at a time the US is looking to slow the flow of dollars. The QE size surprised markets. Emerging markets, say experts, are well-placed to receive this money. There are two more crucial events that the global investment fraternity is waiting for -Greek vote and the Fed meet.

"Once these events are past us, India will be better placed to factor in Budget expectations and reforms," says Nair. Next Tuesday, Maruti, Union Bank, Titan, Idea, KTK bank, GHCL, GSFC, Amaraja Batteries, Godrej Properties and Eveready may announce third-quarter earnings.

Jayant Manglik, president, retail distribution, Religare Securities, says, "Despite positivity across the board, we have been noticing negative market breadth for the last two sessions, which indicates profit-taking at higher levels. It's further fueling the possibility of consolidation or profit-taking in the coming days and that's healthy for markets after such swings. So, we suggest participants to follow the buy on dips approach but be extra cautious in stock selection at current levels."