Weekly Recap: The Market for Lemons

Nifty ended the week +2.76% (INR) +5.31% (USD) as both the markets and INR rallied on the back of the non-taper announcement from the US Fed.

Index Performance

Realty took a hit yesterday on the back of RBI’s 25bps rate hike (previously: here)

Top winners and losers

SRTRANSFIN	+13.54%
JSWSTEEL	+17.30%
YESBANK	+26.62%
RANBAXY	-26.98%
GSKCONS	-7.04%
BHEL	-5.15%

All over the place, as the market tries to make up its mind…

ETFs

BANKBEES	+5.05%
JUNIORBEES	+3.13%
PSUBNKBEES	+2.83%
NIFTYBEES	+2.81%
GOLDBEES	+1.58%
INFRABEES	-4.55%

Banks rallied on the back of “no-taper” but are likely to give up most of their gains as RBI’s tightening stance sinks in…

Advancers and Decliners

Yield Curve

What exactly did the RBI do? Short term-yields have actually come down in spite of the 25bps increase in repo-rate. Ajay Shah tries to explain the head-scratcher here: The RBI has just intensified the muddle.

Sector Performance

Thought for the weekend

Markets characterized by asymmetric information between sellers and buyers commonly resulted in declining quality of products offered for sale. In a market where the quality of products for sale is difficult to determine (such as used cars), if the majority of offerings are low quality “lemons,” buyers will come to distrust sellers and drive the average transaction price down to the “lemon price.” In this environment, the sellers of high quality used cars will only be offered lemon prices, since buyers can’t tell the difference. And since lemon prices are below the true value of the high quality vehicles, the sellers of good used cars will choose not to sell, eventually resulting in a market with only lemons being offered for sale.

Source: The market for idiocy