The Hindu : Business : Sensex at record levels

Online edition of India's National Newspaper
Monday, Dec 20, 2004

Business

Business

Sensex at record levels

STRONG economic outlook, expectations of good third quarter results from corporates and unabated and aggressive buying by foreign institutional investors took the Sensex (the benchmark index of the Bombay Stock Exchange) to a historic intra-day peak of 6437 and a record closing peak of 6420.38 during last week.

However, the dizzy heights could not be retained as institutional and retail investors rushed to book profits. The index came down to close the week at 6346.48, still registering a net gain of 112.94 points over the previous weekend close of 6233.54. The S&P CNX Nifty of the NSE gained 43.10 points for the week at 2,012.10.

The FIls recorded net purchases of Rs. 1,463.9 crores ($ 324.4 millions) in equities during the week while Mutual Funds made net investments of Rs. 119.72 crores.

Their equity investments so far this year total at $8.07 billion (Rs. 37,000 crores), the highest ever for any calendar year. Along with investments in the debt markets, they have pumped in about $ 9.43 billion (nearly Rs. 43,000 crores) so far in the current calendar year. It is, however, likely that there may be a slowdown in their activity towards the year end because of the holidays.

Ranbaxy, BHEL, ACC, Tata Power, Apollo Tyres, Bombay Dyeing, Hero Honda, and Bharti Tele-Ventures were among the counters that made impressive gains. Active buying was witnessed in power, cement, pharma, bank (especially old generation private sector banks), automobile and tyre stocks. Tata Power, Neyveli Lignite and BHEL met with renewed interest on hopes of greater activity in the power sector with the plans for adding more than one lakh mega watts capacity in the next five years. In cements, Grasim, Gujarat Ambuja, Madras Cements, Shree Cement and India Cement ruled firm on expectations of larger demand from the infrastructure sector. In the last fortnight cement prices had risen by Rs. 20-25 per bag in the southern markets.

Stocks of private sector banks were in great demand in the latter part of the week. ING Vysya Bank announced its proposal for a rights issue in the ratio of three shares of Rs. 10 each for every equity share at a premium of Rs. 35 per share. Karnataka Bank for its part has decided to raise capital by issuing rights shares in the ratio of two shares of Rs. 10 each at a premium of Rs. 10 per share for every equity share held. More private sector banks are expected to follow suit to shore up their capital. But shares of State Bank of India declined with the RBI banning further FII investment in the bank as the ceiling of 20 per cent has been reached.

Among stock specific, Zee Tele witnessed some buying interest on account of the recent announcement to hike cable charges, which will directly benefit the company.

Notwithstanding a late downward correction, the rupee surged by a massive 79 paise against the U.S. currency during the week, buoyed by unabated FII inflows into the booming stock markets on the back of a mostly weak dollar against major global rivals.

During the week, the volume of business on the BSE and the NSE was Rs. 10,598 crores and Rs. 23,519 crores respectively.

Analysts feel that there is a sense of heaviness in the market. Therefore, a sharp upward movement seems limited. At this level, investors should tread cautiously and a stock-specific approach is recommended.

Rupee hardens

The rupee ended at Rs. 43.96/98 a dollar against the previous weekend close of Rs. 44.75/77 after hitting peaks of Rs. 43.75/77 in early trade on Thursday.

The futures market was also active even as corporates and importers covered their open exposures and pushed up premiums across the spectrum amidst tight liquidity conditions on the domestic money market.

Interest rates stable

Interest rates ended without much change as compared to the previous week. The 10 year government security was traded at 6.70 per cent and the five year security at 6.45 per cent. The year on year inflation was marginally lower at 7.02 for the week ended December 4.

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