The Hindu : Buying spree on bourses

Online edition of India's National Newspaper
Monday, Jun 30, 2003

Business

Business

Buying spree on bourses

AFTER A small healthy correction, in the first two trading sessions, the stock markets witnessed sustained broadbased buying during the rest of last week. Bull operators entered the market afresh and there was a buying spree particularly on Friday when the market witnessed a high level of volatility. The bullish mood is attributed to hectic buying by foreign institutional investors, larger retail investor participation, firm U.S. markets, good progress of the monsoon, hopes of more disinvestments and encouraging performance by major corporates. Stocks from almost all the sectors — technology, cement, auto, pharma, media and telecom — participated in the rally. Sentiment got a further boost on Friday after the U.S. Federal Reserve cut the interest rates to a 45-year low, claimed to be beneficial for Indian IT companies.

The BSE benchmark 30-share index ended the week on a highly positive note at 3583.06 netting a handsome gain of 83.56 points or 2.39 per cent over its last week closing level. The Sensex, with small corrections at regular intervals during its upward journey, has risen by 17.48 per cent or 533 points over five weeks mainly on the back of heavy flow of foreign institutional investments.

Led by Infosys, technology stocks continued to track the buoyancy in U.S. markets and ended with good gains. Infosys spurted on expectations of better earnings. Satyam Computers, Digital and Wipro also appreciated. Aptech gained after the SSI announcement that it would consider the sale and disposal of its educational and training business as a going concern to Aptech, for a consideration of not less than Rs. 28.65 crores. Hexaware rose on reports that it had won a multi-million dollar engagement and would provide business critical HR solutions to the U.S. customer. On Friday IT stocks rose further following the overnight gains in U.S. markets after the Treasury Secretary said that the U.S. economy would gain strength in the next six months, as lower taxes and interest rates take effect.

PSE stocks surged on news that the disinvestment of HPCL would be completed by November. The due diligence for the sell-off would reportedly start in August while the shareholders and share purchase agreements would be circulated among the bidders next week. The stock rose to a new high of Rs. 352 on FII buying after it announced a 49 per cent jump in its Q4 net profit and a dividend of Rs. 20 per share for 2002-03.

VSNL's Sri Lankan arm — VSNL Lanka — has received the external gateway operator (EGO) licence from the Telecom Regulatory Commission of Sri Lanka. The licence will enable VSNL to provide international long distance voice and data services to Sri Lanka. It has also formed a fully-owned subsidiary in the U.S., VSNL America Inc., to offer Internet Protocol-Virtual Private Network solutions in that country. MTNL stock rose on divestment hopes. The ONGC reported excellent working results. It is the first Indian corporate with a profit crossing the Rs. 10,000-crore mark.

There was smart rally in auto and auto-ancillary stocks in the wake of reports of a good monsoon. Telco breached the Rs. 200-mark on talk of a large order for commercial vehicles from South Africa. Others like TVS Motors, Mico, Bajaj Auto and Ashok Leyland gained modestly.

Most steel stocks rallied on hopes of another price hike and growing potential of exports to China. SAIL, Tisco, Jindal Iron, Uttam Steel and Saw Pipes posted handsome gains.

Cement stocks continued their uptrend on sustained buying. Grasim's acquisition of L&T's cement unit is seen as leading to more consolidation in the sector. There was a smart rally from lower levels in cement stocks due to increase in demand for the building material. Grasim, Gujarat Ambuja, L&T and ACC have posted smart gains. Chettinad Cement advanced on sustained buying support, after the company said that it was back in the black.

Fertilizer stocks were in the limelight on encouraging reports of the monsoon. There was aggressive buying in United Phosphorus, buoyed by the company's recent acquisition of Dow AgroScience LLC, of the U.S. Nagarjuna Fertilisers, GNFC and RCF gained. Indo Gulf rose to Rs. 68 after TGS Investments & Trade Pvt Ltd, Indian Rayon, and Grasim Industries of the Aditya Birla group have announced an open offer to acquire up to 90.18 lakh shares of the company at Rs. 75 per share in cash. The offer to acquire this 20 per cent of holding opens on July 31 and closes on August 29.

Cigarette maker ITC attracted strong buying enquiries from institutions and operators to close with a handsome gain. Sentiment in the pharma sector improved with moderate to good gains as a result of news that the U.S. Senate and House of Representatives had approved a bill on Friday that would make it harder for brand name drugs to stave off competition from cheaper generic versions. The bill now makes it easier for Indian firms to launch drugs in the U.S.

The market undercurrent remains strong. As long as the strong inflows from FIIs continue, the market will continue its momentum, according to a leading broker.

Rupee at new peak

The rupee-dollar fluctuations will continue to be driven by demand-supply forces. However, international influences will be felt to a greater degree than in the recent past. While the U.S. economic numbers present a mixed picture, overall prospects for a recovery seem brighter than ever before. The benchmark stock indices have all exhibited a degree of bullishness. It might be only a short time before the dollar starts reflecting the general optimism.

The rupee ended the week at a new 28-1/2-month high of 46.3950/4050 to a dollar, a whopping gain of 15 paise from the previous weekend levels of 46.54/55.

Steady trend on debt market

The U.S. Federal Reserve has reduced the key interest rate by 0.25 per cent to one per cent. However, the Reserve Bank of India is not in a hurry to follow suit and wants to watch the domestic inflation level for some more time. Meanwhile, the inflation has fallen further to 4.97 per cent for the week ended June 14.

The 10-year government security was traded at the yield rate of 5.73 per cent and the 5-year security at 5.32 per cent on Friday, not much changed from the previous weekend rates, even though the rates fell in the early part of the week. The Government of India has announced an increased borrowing of Rs. 12,000 crores on July 1 against the original notified amount of Rs. 9,000 crores, possibly to mop up the excess liquidity from the inter-bank system.

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