The Hindu : Stock indices at historic highs

Online edition of India's National Newspaper
Monday, Jan 12, 2004

Business

Business

Stock indices at historic highs

WITH SUSTAINED inflows from foreign institutional investors and a strong bull support in an extremely volatile market, the Sensex touched a new intra-day high of 6249.62 on Friday surpassing its previous record of 6150.59 on February 14, 2000. The announcement of better than expected quarterly results by IT majors such as Infosys Technologies, Hughes Software and MphasiS BFL also boosted sentiment. There were also supportive measures such as the Government's announcement of market-friendly tax reliefs to corporate and individuals, the Securities and Exchange Board of India's approval for margin trading and securities lending from February 1, Government's further impetus to the disinvestment plans and the Reserve Bank of India's optimistic forecast of the gross domestic product growth. The markets took the various sops positively.

Stocks across the board soared after the Government announced a cut in customs and excise duties on a host of sectors including non-farm goods, coal, power projects, electricity meters, mobile phones, computers, aviation fuel, electrical appliances and bulk drugs. Besides, tax returns up to Rs. 1.50 lakhs for the salaried class have been done away with. The SEBI has permitted brokers to finance clients through margin trading. It approved a proposal to revise the current margin trading norms by lifting the ban on brokers carrying out fund-based activities.

The Union Finance Minister unveiled yet another package meant for farmers, rural folk, small and medium entrepreneurs, senior citizens and students.

On the back of hectic buying from operators, retail investors and FIIs, the Sensex, in a seven week long rally, ended at a new high at 6119.59, a net rise of 93 points or 1.54 per cent. During the week, only on Tuesday, the index closed 95 points lower as a result of profit booking.

The volume of business on the BSE rose to a 34-month high at Rs. 4,134.61 crores on January 9. The exchange had recorded the highest single session turnover of Rs. 4,601.38 crores on March 7, 2001.

The FIIs which have pumped in record net investments during 2003 and driven the bourses to new highs, made net purchases of Rs. 1,059 crores in five sessions between January 1 and 7.

The banking sector was the highest gainer with the PSEU Bankex shooting up by 114.19 points or 3.95 per cent to finish at 3007.66 against 2893.47. The BSE PSU index also spurted by 122.98 or 2.93 per cent to a new high of 4322.93 against 4199.75.

Power companies such as Tata Power and Reliance Energy were among the top gainers. Among other stocks, IDBI and IFCI were in keen demand. The Finance Minister, Jaswant Singh, on Saturday, announced April 1 as the target date for IFCI's merger with a public sector bank. He indicated that IFCI's impaired assets would be transferred to an asset reconstruction company. Both domestic and overseas funds have reportedly been accumulating the stocks in bulk over the last few days. He also said the Government would attempt to finalise all steps to convert IDBI into a bank by the same target date of April 1.

Rupee hardens

The rupee continued to strengthen and gained 25 paise during the week on the inter-bank market. At the global level, the dollar remained bearish pushing major currencies to record highs. For the rupee it was much more than the dollar's weakness however. As the stock indices show, there is all round optimism in the financial markets.

Interest rates steady

Interest rates remained steady last week, despite a higher inflation rate. The ten-year government security was traded at 5.12 per cent and the five year security at 4.73 per ent. The year-on-year inflation moved up to 5.75 per cent as on December 27.

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