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Bourses fail to retain early gains

THE SENSEX touched a 43-month high last week but filed to retain most of the gains. The rally in the early part of the week was attributed to encouraging quarterly results, strong fundamentals and sustained inflows of FII funds. The projections of higher GDP growth rate of 6.5-7 per cent by the Reserve Bank in its credit policy announced on November 3 fuelled the sentiment.

However, profit booking by domestic funds and retail investors in index-based scrips at higher levels around mid-week trimmed a large part of the early gains. The gains recorded on Monday and Tuesday were wiped out in the rest of the trading sessions. The FIIs too slowed down their purchases at the fag end of the week. The weakness in the Asian markets was another contributing factor. The markets lost significant ground in the final hour of trading on Friday, resulting in the Sensex closing in the red for the third consecutive day.

The BSE-30 sensitive index opened firm at 4946.93 against the previous weekend close of 4906.87 and touched a 3-1/2 year high of 5135. However, higher levels attracted heavy profit-booking by local funds and retail investors that pulled down the Sensex to a low of 4946.93 before ending the week at 4971.57, a gain of 64.70 points or 1.32 per cent.

The FIIs pumped in Rs. 1,506 crores in the first four days of the week. Cement, pharmaceutical and technology stocks ended with modest gains on institutional support during the week. Shipping, steel, paper, media and power were also in demand. Index shares including heavyweights such as Infosys Technologies, HLL, Grasim, Satyam Computer, Hindalco, HCL Technologies, L&T, MTNL, Ranbaxy, Tisco and Zee Telefilms finished with sharp gains.

In cement, ACC, Gujarat Ambuja and Grasim registered concrete gains on reports that the cement majors were planning to raise prices by Rs. 5 a bag. Among auto stocks, Maruti, Hero Honda and Tata Motors staged an impressive performance.

Bank stocks shed top gains after the RBI left the repo and bank rates unchanged in its review of the monetary and credit policy against expectations of a rate cut. Bank of Baroda, Punjab National Bank and Oriental Bank were among major losers.

ICICI Bank witnessed selective buying after it announced the acquisition of a U.K. banking licence. It has set up ICICI Bank U.K., a wholly owned subsidiary to offer a range of products targeted at corporations and high networth individuals.

Among others, Dr. Reddy's Lab touched a new 52-week high on buying support after the company announced that it had received the final U.S. Food Drug Administration approval for selling the generic, Amlodipine Maleate.

Tech stocks ruled firm after Cisco Systems, a major client of Indian IT companies such as Infosys and Wipro, announced stronger-than-expected quarterly results after trading hours on Wednesday. Software stocks attracted some buying. Activity was, however, centred on side counters. Shipping stocks stayed firm. Essar Shipping surged on heavy volumes. SCI and GE Shipping too gained. The overall crude tanker market is expected to firm up due to the winter demand.

Among pharma stocks, Ranbaxy slipped on Friday after early gains. It had risen in early trades on reports that the company had acquired the French generic drug company RPG Aventis for about $70m.

On November 10, five scrips Wipro, ONGC, Bharti Tele-Ventures, HDFC Bank and Tata Power will replace Castrol, Colgate, GlaxoSmithKline Pharma, Nestle and HCL Technologies in the BSE Sensex.

According to analysts, even though the markets have shown weakness over the last three trading sessions, they expect buying at lower levels, as the medium term picture remains bullish.

Rupee remains firm

The outlook for the rupee-dollar remains clouded even as there is increasing evidence of a recovery in the U.S. On the other side, FII funds continue to prop up the share markets, suggesting an abundance of dollar supplies. For the coming week, it is likely that the rupee will trade in a narrow band against the dollar.

In fairly choppy two-way trading at the interbank foreign exchange market during the week, the rupee ended at 45.26/27 a dollar, sharply higher from the previous weekend level of 45.3200/3250.

Interest rates lower

Interest rates fell during the week on top of increasing liquidity. The rates had looked up in the earlier part of the week as the RBI did not cut the rates in its monetary policy announcements. The ten-year security was quoting at 5.08 per cent and the five year security at 4.77 per cent. The year-on-year inflation as on October 25 was 4.96 per cent.

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