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Rate hikes by central bank as well as fears of a default by Greece pushed markets lower, with the Sensex losing 2.18 % to close at 17, 871 last week. The Nifty, too, lost 2.18% to end at 5366. The Reserve Bank of India (RBI), as part of its anti-inflationary measures, raised rates by 25 basis points in its monetary review policy. This is the tenth time in the last 15 months that the central bank has raised rates.
Analysts fear this could hit growth in the medium term. Hence, stocks were marked lower during the week. Reliance Industries was the top loser amongst Sensex stocks, touching a 52-week low, falling by 8% in the process to close at Rs. 868. This was on account of reports by the Comptroller and Auditor General of India (CAG) accusing the oil ministry of favouring the company by allowing it to double the development cost of its KG-D6 gas field. Maruti fell 5% to end at Rs 1,167 on account of the labour strike at its plant in Manesar.
Also, higher interest rates and higher cost of petrol continue to affect car sales. "Till we get indications of a good monsoon and peaking of interest rates, the markets are in for some testing times," says Kaushik Dani, fund manger, Peerless Mutual fund. In the short term, markets are likely to watch out for the progress of the monsoon and movement of oil prices.
DEBT MARKETS:
The RBI continued with its hawkish stand by raising rates by 25 basis points again. With diesel and kerosene prices likely to be raised, inflation is likely to move upwards. Hence, analysts fear the central bank may resort to more rate hikes. They feel another hike of 25-50 basis points is likely in the second quarter, and that is when the inflation could peak out.
Hence, retail investors should invest only in liquid and liquid plus funds, they suggest.
GOLD:
With the festive and wedding season over, there is lower demand for the yellow metal domestically. Hence, prices moved down marginally by Rs 135 per 10 grams over the last week to end at Rs 22,290 per 10 grams. However, experts feel that gold prices will continue to rule firm on fears of a potential default by Greece on its sovereign debt.
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