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Budget hopes, small investors, FIIs ready Sensex for Point 6K

Aravamuthan Sasikant in Bombay

India's stock markets have acquired a new momentum. The two premier indices -- the Sensex of the Bombay Stock Exchange and the S&P CNX Nifty of the National Stock Exchange - have ended at all-time closing highs for the second consecutive day today. Unlike yesterday when early gains were pared towards close, the indices ended near the day's highs.

The Sensex at 5782 was up 2.3 per cent; the Nifty at 1712 was up 1.78 per cent. The rally is driven by a double-head: speculation and real investment. Foreign institutional investors have been buying all through February. In the first nine days of the month, FIIs' investments (equity plus debt instruments) stood at Rs 8.79 billion ($177.6 million). From January 1, 2000 till date, FII inflows stand at Rs 10.76 billion ($247.1 million). In fine, February contrasts with January ( Rs 1.97 billion) in terms of FII inflows. In calendar 1999, FIIs pumped Rs 66.96 billion ($1.56 billion) into the Indian markets.

Dealers say the small investor has returned in a big way but with a different strategy. A trader at a Bombay brokerage says, "Information is easily available on what fund managers are buying. Many retail investors ride piggyback on them which results in a further push in stock prices."

While the 1999 rally was driven primarily by the "golden triangle" of information technology, fast moving consumer goods and pharmaceuticals sectors, the current rally has seen an improvement in stocks across-the-board.

Infotech stock prices have definitely risen. So have those of other sectors. Among the Sensex heavyweights, ITC, Reliance and MTNL have led the rally. ITC has gone up from Rs 665 on December 30, 1999 to Rs 896.90 today. In the same period, Reliance rose from Rs 233 to Rs 365, ICICI from Rs 92 to Rs 155 and MTNL from Rs 193 to Rs 351. Infosys was at Rs 7,258 in December 1999 and ended today at Rs 9,200.

Other sectors of the economy are also driving the rally. "The government has taken positive steps like relaxing foreign direct investment norms and the reduction in small savings rate. If the government spends on infrastructure, then the targeted GDP growth rate of 8 per cent can be achieved," says stockbroker K R Choksey.

The prospect of a further drop in interest rates has helped the market to retain the bullish sentiment in spite of the finance minister's warning of a tough budget, say analysts.

The markets will remain volatile as outstanding positions are high, but a correction in the short-term is within the realm of possibility, they add. "A correction would be healthy for the sustenance of the long-term bull market," says a stockbroker.

UNI adds: Software, media and telecom shares continue to rule the market.

The Sensex index has so far gained 475.45 points in last four consecutive trading sessions, while the Nifty added 211 points in same period.

The record jump by the Nasdaq Composite Index in the US and positive expectations from the Union Budget towards the capital market, as well as the IT sector, were the major reasons behind the bull run, market experts opined.

''We are hopeful of a futuristic budget from Union Finance Minister this time and with this we also expect the Sensex to cross crucial the 6,000 level prior to the budget,'' said Vasudeo Joshi, director (research), HSBC Securities.

Stockbroker and BSE vice-president Dina Mehta said that people are expecting various concessions for IT, telecom and pharma sectors in the forthcoming budget which might have boosted the market sentiments on the country's leading bourse.

According to market circles, there has been some fresh buying at the Infosys counter. Besides, Infosys, Hindalco, L&T, Mahindra & Mahindra, BSES, ITC and MTNL reportedly posted about eight per cent gains over their previous levels and, in the process, hit the upward circuit.

According to market circles, some selling pressure was witnessed in the refinery stocks and software stocks like Satyam, Wipro, BFL Software, Aptech during the day.

Among other highlights, the authorities at the BSE today imposed special margins in thirteen more scrips, pushing up the figure of scrips with special margins to 214; the scrips include AGK Comp, Alang Ind, Anco Comm, Bhagyanagar Woods, Catvision Products, Chartered Cap, Filatex Ind, GTCL Mobile, Medical Corporation, Interfit Tech, Oxford Ind, Penta Pharma, Sujata Infotech.

Besides, the BSE also annouced that FIIs can now invest up to 30 per cent in 30 more scrips including heavyweights like Asian Paints, HDFC, Infosys Tech, Mastek, NIIT, Ranbaxy, Satyam Computers, and Software Solutions. Market circles also attributed these factors to the bullish phase.

Total turnover on the BOLT system reported during the day was Rs 41.30 billion.

Himachal Futuristic Comm topped the list of turnover by registering the highest turnover of Rs 4.47 billion, Silverline Rs 3.72 billion, Pentafour Software Rs 3.30 billion, Reliance Rs 3.11 billion, Zee Telefilms Rs 3.00 billion and Satyam Computers Rs 2.85 billion.

Other actively traded counters were Global Telesystems, Infosys Technologies, L&T, Ranbaxy Labs, Wipro, SBI, SSI, Digital Equipment, HCL Infosys and ACC.

Additional reportage: UNI

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