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Point 4600, almost! Indian bourses scale new peaks as army wrests mountainous Kargil

V V L N Sastry in Bombay

The stock markets in India today reinforced the fact that more than anything else, it is the so-called "sentiment" that drives them, often times to the extremes.

The real and imaginary sway of the foreign institutional investors over the Indian markets has been much discussed during the last several months. However, since May this year, Kargil has been the sentiment that determined the swings of the country's bourses.

The market players began the day armed with news that Pakistan's Prime Minister Nawaz Sharief's televised address to his nation will mark the formal beginning of the retreat of 'Islamic militants' from Kargil.

This was interpreted as a sure sign of return of peace and stability to the strife-torn Kashmir and the cessation of hostilities between the two countries. Market players felt the prospect of full-blown war which could have devastated the two economies and nations, has been given a much-delayed burial.

All the major indices started spurting right from the word go. The 30-share benchmark index, the Sensex, opened 100 points higher from the previous close. And it never looked back after that, so to say, as sellers went on a selling spree and buyers ducked for cover. Operators were in seen in action as much as the FIIs, a few dealers said.

The Sensex closed 15 points short of 4600, up 5.10 per cent. The S&P CNX Nifty at the National Stock Exchange too registered an all-time high rise in a day, spurting 61 points or 4.89 per cent. Other indices too posted handsome gains in the 4-5 per cent range. The rupee closed eight paise higher against the US dollar at Rs 43.21, though demand for the greenback intensified towards the end of the trading, following low hedge rates for the forward dollar.

Market sources said the announcement of election dates coincided with the good news from Kargil. This apparently raised fresh hopes that this time round, the Indian electorate would vote to ensure a stable government at the Centre. A stable government is the prescription for further economic recovery from the recessionary trend, they said.

The upbeat sentiment was so strong that the markets witnessed numerous records today, particularly in the spurts of the indices. Trading volumes were at a record high at 122 million at the BSE and 144 million at the NSE.

Economy-sensitive stocks hogged the limelight today. Most of them hit the upper limit of respective circuit-breakers. Software shares made a moderate recovery following the encouraging results announced by Infosys Technologies. The market anticipated good results from Satyam Computers and indeed the results were positive; however, Satyam's stock remained steady. The bourses were busy with the economy-related and frontline stocks.

The US-based funds are yet to participate in a "really big" way, a leading dealer said, adding that this could only mean the Sensex might scale a higher peak shortly.

Prices of cyclical stocks soared, so did commodity stocks. The pharma sector displayed signs of a rebound, only to settle down later as results of leading pharma companies like Hoechst Marion -- its net declined by nearly one-third from the previous quarter's -- started filtering in.

During the rest of the week, the focus would be on the reaction of the FIIs to the upbeat sentiment. If India emerges as the victor in the Kargil conflict in the perception of the comity of nations, the stock markets would continue their dream run. The Sensex then would be poised to have a go at Point 5,000.

The FIIs are said to be keen on making Point 5,000 their profit-booking level. In the short to medium term, much would depend on the outcome of the elections. The poll result will shape the sentiment.

There is already talk that installation of a government with a clear majority in the Lok Sabha will spur the markets beyond the 5000 level and towards Point 6,000!

Currently, cyclicals are favoured because they offer easy exit stocks. But over a period of time, the focus is expected to shift back to software, pharma and fast moving consumer goods.

ALSO SEE:

July 13, 1999: Sensex breaches all-time high of 4678 in intra-day trading

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