Sensex closes at 14-month high for 2nd consecutive week

The week proved to be very eventful for the Indian stock markets. The domestic bourses continued to register triple digit gains which were largely trigerred by the government's decision for FDI reforms. Indian markets were the best-performing markets globally this week. The government's decision to go ahead with the notification allowing foreign investment in multi-brand retail, aviation and broadcasting sectors despite widespread political conflict boosted sentiments on the D-Street. Moreover, Samajwadi Party leader Mulayam Singh Yadav said his party will continue to extend external support to the UPA government also added fuel to the sentiment.The Government also reduced the withholding tax on overseas borrowings and also cleared the Rajiv Gandhi Equity Savings Scheme. Sectorally, BSE Realty, Bankex, Capital goods and Power were the leaders this week. Stocks in the FMCG, Healthcare and IT were the underperformers, after their strong run-up in recent weeks.During the week, the 30-share index, Sensex climbs 288.56 points, or 1.56% to 18,752.83, a 14-month high. On the other hand, the broad based NSE Nifty gained 113.5 points, or 2.03%, to 5,691.15. All the sectoral indices at the BSE ended mixed. Top gainers were BSE Realty (8.84%), Bankex (6.96%), Capital goods (6.88%), Power (5.82%), PSU (4.22%), Auto (3.26%), Metal(2.97%), Oil & gas (1.57%) and Consumer durables (0.71%). However, BSE IT (3.56%), Healthcare (2.18%), FMCG (2.05%), and Tech (1.28%) dropped for the week.Meanwhile, BSE Midcap and Smallcap gained 3% and 2.81% respectively. While commenting on the market outlook, Dipen Shah, Head of PCG (Private Client Group) Research, Kotak Securities said, '' We are enthused by the reform initiatives announced by the Government. These initiatives open the doors for foreign monies to flow in. However, we believe that, these will now have to be followed-up by some of the core reforms, which will encourage further investments in the manufacturing segment and hence, attract more money.The Government also reduced the withholding tax on overseas borrowings and also cleared the Rajiv Gandhi Equity Savings Scheme. We believe this will provide some impetus to the retail participation in the market by increase in participation from first time retail investors into the market.Concerns about the stability of the UPA Government were also largely addressed. With political uncertainty addressed to a large extent markets are now hopeful of further reforms being announced in India. The FM has already indicated that, a National Investment Board should be set up, to reduce the time taken to approve large projects. This should help concerns relating the procedural and administrative delays, we believe. Further progress on issues like power, mining and land acquisition will provide a much-needed fill-up to investments, which have been held back till now. The markets will take cues from these initiatives to stabilize and move up further.''