The Hindu : Business : High growth numbers lift market morale

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Monday, Apr 05, 2004

Business

Business

High growth numbers lift market morale

THE UNEXPECTED double digit growth of the economy in the third quarter of 2003-04 announced last week gave bourses the much needed impetus with across-the-board buying in old and new economy stocks. The strong upsurge was also attributed to high expectations on fourth quarter and annual results to be announced from the second week of the month. Blue chips led the revival effort which witnessed a whopping 4.69 per cent gain in Sensex in the week ended April 2.

Heavy buying by operators and domestic financial institutions and consistent net inflow for the third successive week through foreign institutional investors were key factors behind the massive upturn. In the first four sessions, FIIs reported net investments of Rs. 4,884 crores which included their investments in primary markets. They reportedly were the biggest subscribers to the public offers of major public sector enterprises last month.

However, IT stocks, including index-based Infosys, Satyam Computers and Wipro, suffered a sharp setback on selling pressure caused by the rupee's sharp appreciation against dollar and U.S. restrictions on the outsourcing business, which in turn, is expected to affect Indian IT companies. However, on Friday, Nasscom said rupee appreciation would not affect the software export growth target of 26-28 per cent during the 2003-04 fiscal.

The BSE benchmark 30-share index witnessed volatile movements between 5799.16 and 5493.12 before ending the week at a 4-week high at 5788.08 against the previous weekend close of 5528.94, netting a hefty rise of 259.14 points. During the week, banking stocks were in the limelight. Buying interest was also seen in power, cement and refinery stocks.

Among heavyweights, Reliance and Hindustan Lever bounced back on fresh buying. Oil & Gas stocks were also in the limelight on reports that these companies could record bumper profits in the fourth quarter of 2003-04. ONGC continued its volatile movements. In the early part of the week, the stock attracted selling, on allotment of its new shares. High networth individuals, who had received excess allotment, reportedly sold their shares. Later on, their accounts were frozen following detection of the lapse in allotment. Therefore, they had to cover their excessive short sales. Among stock specifics, Bharti Tele-Ventures touched a new high of Rs. 173. 25 on reports that the company is expected to conclude a Rs. 400 crore deal to buy Hexacom, a Rajasthan-based cellular firm.

The telecom major MTNL gained sharply on hopes that the proposed voluntary retirement scheme (VRS) may help the company improve its efficiencies.

Automobile stocks Tata Motors, Hero Honda and Bajaj Auto recorded handsome gains. Maruti Udyog and Mahindra & Mahindra moved up higher. Other auto stocks including Punjab Tractors, Maruti and M&M were in focus. In a result-driven activity, BEL continued its good run on the bourses after the company said its profits rose 16 per cent last year. BEML also gained after it said its profit before tax rose 38 per cent and it had received orders to supply passenger coaches and wagons.

In the banking sector, ICICI Bank gained. Its Rs. 3,050-crore public issue, with a green-shoe option of Rs. 450 crores, which opened for subscription on Friday, was oversubscribed 109 per cent on the very first day. Others such as UTI Bank, Oriental Bank of Commerce, Bank of India, UTI Bank, Oriental Bank of Commerce and Corporation Bank closed sharply higher.

Steel stocks such as Tisco and SAIL were in great demand. Tisco announced that it has crossed the four million tonnes mark in all categories of steel production during 2003-04, with salable steel going up by 3.8 per cent to touch 4.09 million tonnes and crude steel touching 4.22 million tonnes. SAIL said its steel production touched an alltime high of 11 million tonnes in 2003-04 and it sold 10.8 million tonnes in the domestic and overseas markets. Cement pivotals such as Grasim, Gujarat Ambuja and ACC gained further ground amid talks that leading producers may hike prices in Bombay.

Among power sector stocks. Tata Power and Reliance Energy moved up. BHEL witnessed some profit booking. Pharma stocks Ranbaxy Laboratories, Dr. Reddy's and Cipla were firm on buying support.

During the week, the volume on the BSE and the NSE was relatively high at Rs. 10,650 crores and Rs. 23,218 crores against the previous week's turnover of Rs. 9,934 crores and Rs. 20,085 crores respectively.

Rupee at multi-year peak

Robust trade and foreign capital investment inflows drove the rupee to multi-year peaks against the U.S. currency and required central bank intervention through spot-dollar purchases by State-run banks to partly arrest the steep gains. After testing 57-month peaks of 43.30/32 a dollar in early deals on Friday, the rupee underwent a downward correction. In volatile trade during the week, the rupee ended at 43.7350/7450 a dollar, a whopping 72 paise decline from the previous weekend levels of 44.46/48 a dollar.

The rupee closed at a near four-year high of 43.55/65 a dollar on March 31, driven-up sharply by sustained heavy foreign fund inflows and export remittances.

Interest rates easy

Interest rates fell marginally last week due to fall in the inflation rate. The year-on-year inflation moved down to 4.30 per cent as on March 20 from 4.78 per cent in the previous week. The ten year government security was traded at 5.12 per cent and the five year security at 4.77 per cent.

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