High interest rates have managed to dampen demand to some extent. However, despite this, inflation continues to remain stubbornly above the comfort level. Headline inflation for the month of September 2011 is hovering very close to the double-digit mark, with wholesale prices rising 9.72 per cent in August 2011. The reason to start off this fortnight’s Market Moves analysis with this piece of data is fairly obvious – high levels of inflation have been the single-most important factor dominating the macro-economic scene for a very long time now. The RBI’s consistent rate hikes have yielded little result in combating high inflationary trends, and there seems to be no respite. The regulatory body is expected to hike rates yet again.

Of course, what really mattered for the market during the past fortnight were the corporate results that have started trickling in. Software major Infosys declared its results, which were quite in line with market expectations. This has probably buoyed the market sentiment, which was sagging under macro-economic pressures, both on the domestic as well as the international fronts.

For now, the market seems to be getting into a festive mood. The past fortnight ended on a fairly positive note. The Sensex and the Nifty ended up by eight per cent each, despite some selective bouts of intermittent selling. There was a distinct positive bias in the market, with some positive cues emerging on the international front, particularly in the Euro zone. All broader market indices were up an average seven per cent over the fortnight.

The action in the Mid- and Small-Cap space seemed to be on  the lower side, as compared to that in the larger counters. The BSE Mid-Cap Index was up four per cent, while the BSE Small-Cap Index ended the fortnight up three per cent. Among the sectors, realty, bank and consumer durables stocks fared the best. The BSE Realty Index ended up by 11 per cent, while the BSE Bankex and the BSE CD Index were up by 10 per cent each. The metals and auto counters too have been in demand. The BSE Metals Index was up nine per cent over the fortnight, while the BSE Auto Index ended up by eight per cent. Results in line with expectations kept the IT stocks in demand. The BSE IT Index ended the fortnight up by seven per cent. All other sectoral indices rose by an average four per cent.

Institutional activity over the fortnight remained on the positive side, with FIIs pumping in a net USD 133.29 million in equities. Their Indian counterparts too, put in a net Rs 676 crore in equities during the period. Eventually, the flow of dollars will help the market break out from trading in the tight range that it is presently in.

With Diwali around the corner, the festivities are waiting to begin. Some believe that Muhurat trading is merely of some religious significance today. However, the traditional belief of ushering in good luck, health and wealth by kicking off the year at that special moment still persists widely. The following fortnight will witness the commencement of the new year, and all hopes are now pinned on the abatement of pressures, especially those emerging from the Western world. There are already some positive voices emanating from the US. The Federal Governor for St. Louis has been reported to have said that the US has avoided the “recession scare”, and that he sees a “surprise on the upside” with regard to economic data. Now, if this turns out to be true, the markets are just about waiting for the new year for things to turn out to be better than expected. After all, last year we did expect it to be good, but it turned out to be decisively the other way round.