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A maturing market amid the mayhem

from Expert Zone:

India Market Weekahead: RBI policy holds the key

(The views expressed in this column are the author's own and do not represent those of Reuters)

Markets extended a rally for the third consecutive week led by strong FII inflows. FIIs have pumped in $1.2 billion so far this year as risk sentiment stabilised after several European debt auctions saw lower borrowing rates and overwhelming demand. Improvement in U.S. economic data, rupee appreciation and December quarter earnings exceeding lower expectations helped the market rally nearly 8 pct in three weeks.

The initial set of corporate results surprised the street as HDFC Bank, Axis Bank, Wipro, TCS, HCL Technologies and Hero MotoCorp posted better-than-expected numbers.

However, Reliance Industries (RIL) disappointed with a net profit de-growth of 13.6 pct year-on-year on the back of lower refining and petrochem margins. Its gross refining margins declined sharply to $6.8 per barrel from $9 per barrel. The buyback of $2 billion at a maximum price up to 870 rupees/share for up to 120 million shares or 3.6 pct equity via open market is seen as a cover-up for the subdued results. RIL stock has already gained 8 pct during the week after the announcement of the buy-back program. We may see a knee-jerk reaction to the results when trading opens on Monday but the buy-back may provide a cushion at the lower end.