The Hindu : Business : Bourses firm despite Reliance episode

Online edition of India's National Newspaper
Monday, Nov 29, 2004

Business

Business

Bourses firm despite Reliance episode

DESPITE selling pressure in all Reliance group shares in the wake of friction between the Ambani brothers over "ownership issues", sustained inflows from foreign institutional investors and buying support from domestic operators kept the bourses active last week and the market surged 1.23 per cent to end the week above the 6000-mark at a 46-week high of 6035.03.

The market was waiting for Anil Ambani's statement. However, the issue took a serious turn after an e-mail to the group's employees by Mukesh Ambani that he was the ``final authority'' on all matters concerning Reliance. This was followed by resignation by six of the 12 directors from the board of Reliance Energy which resulted in share prices of Reliance group companies, Reliance Energy, Reliance Industries, Reliance Industrial infrastructure, Reliance Capital and IPCL, closing lower at the fag end of the Thursday session.

The sharp recovery in international crude prices and the hike in railway freight rates during the week however had a sobering effect on the bourses.

The BSE benchmark 30-share index fluctuated between 6081.74 and 5877.97 before ending the week at 6035.03 against the previous weekend close of 5961.71, a net gain of 73.32 points. The Sensex touched a 10-month high of 6,081.74 in intra-day trades on November 25. The BSE-100 index firmed up by 49.26 points to 3246.20.

But for the hiccups over the Reliance episode, the market was bullish on strong economic fundamentals and an unabated flow of foreign funds that hit a new record. In the 11 months of the current calendar year, foreign institutional investors have pumped in about Rs. 30,000 crores or $6.6 billion, the highest-ever for a calendar year.

Textile, automobile, pharma, shipping, and sugar stocks were in demand. There was some profit taking on the expiry of futures and options contracts on Thursday. While the Reliance group stocks dragged down the market from higher levels, auto and FMCG stocks provided support to the Sensex. The four-session week was truncated on account of a holiday for Guru Nanak Jayanti on Friday.

Mixed activity was seen in public sector banks, after the wage hike announcement. The Indian Banks Association had approved a 13.25 per cent wage hike for all employees of state-owned banks. The hike would be effective from November 2002. Most banks have been providing for a wage hike and the outlook for these banks remains positive.

Among oil and refinery stocks, HPCL and BPCL witnessed some selling pressure after the Government reversed the decision on a monthly hike of Rs. 5 per cylinder for LPG.

Textile scrips continued their good run. Alok Industries, Nahar Exports, Arvind Mills, Raymond and Century Textiles were in demand. The World Trade Organisation members will end all quantitative limits on textiles and clothing from January 1, 2005, paving the way for a massive shift of production activity to low-cost countries.

Among auto stocks, expectations of strong bike sales in November saw Hero Honda zoom. Tata Motors was also in the limelight.

On the National Stock Exchange (NSE), the S&P CNX Nifty and the S&P CNX Defty improved by 28.70 points and 22.25 points to 1901.05 and 1461.85.

During the week, the volume of business on the BSE and the NSE was relatively high at Rs. 7,935 crores and Rs. 18,064 crores compared to the previous week's turnover of Rs. 6,426 crores and Rs. 16,657 crore respectively.

Analysts continue to insist that after the sharp rally investors should adopt a selective approach. They recommend buying into banking, oil and commodity stocks. One can consider profit taking in tech stocks, with the rupee showing sustained strength against the dollar.

Rupee recovers

The rupee recovered to 45.0350 on the back of healthy trade and foreign fund inflows. Despite possible month-end pressures and central bank intervention through dollar purchases by state-run banks, the rupee rallied to a five-and -half month high.

The forex spot trade was quiet due to Thanksgiving Day holiday in New York as there were no cash transactions. From the close of 45.1050 on November 19, the Indian currency rallied to 45.0450 on November 22.

Interest rates higher

Interest rates ended higher as compared to the previous week. The ten-year government security was traded at 7.20 per cent and the five year security at 6.82 per cent.

The year-on-year inflation was lower at 7.34 per cent for the week ended November 13.

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