Sentiment gets a boost

By Oommen A Ninan

MUMBAI, NOV. 25. The stock markets seem to be in a consolidation mode and prices are likely to remain buoyant with intermittent correction.

``The markets after a brief run-up seems to be consolidating at current levels,'' said Mr. Ravi Gopalakrishnan, Fund Manager, Sun F&C, a leading foreign institutional investor. According to him, ``India has never seen such a low interest rate scenario and the high dividend yields prevalent in the market makes investment in equities attractive for long term investors.'' Going forward, ``although short term corrections may pull down values after the recent gains, the overall trend appears positive,'' said Mr. Gopalakrishnan, adding, ``for the long term investor, there is now greater upside opportunity and downside risk.''

The stock market indices touched the new recent highs with volumes soaring during the week ended November 23. The benchmark Bombay Stock Exchange sensitive index (Sensex) moved up by 71.97 points to 3252.20 from 3180.23 at the end of the previous week. On the National Stock Exchange (NSE), the S&P CNX nifty index was up 26.75 points at 1062.45 against 1035.70.

``The rally seems to be getting broad-based with several small and mid-cap stocks also gaining sharply. Sentiment has been further aided by improvement in international stock markets,'' said Mr. Imran Contractor, Research Head of Milan Mahendra Securities. According to him, technology stocks continue to rally at a brisk pace on hopes of improvement in the business prospects.

Media and telecom stocks also did not lag behind as operators continued to buy, taking advantage of the bullish sentiment on bourses. Zee Telefilm gained on rumours of strategic stake in the company being given to an international firm. The telecom service provider MTNL were the major gainer after its listing on the New York Stock Exchange (NYSE). Mr. Contractor said the rally in automobile shares continued with most of them touching their near term new highs. Mahindra & Mahindra came out of its higher levels as it was taken out from the 30-share BSE Sensex and Hero Honda was the smart gainer as it had been included in the Sensex. Telco remained the favourite of the sector. The run into auto ancillary stocks also seems to be beginning with stocks like Sundram Fasteners and SKF Bearings are gaining with increasing volumes.

Dr. Reddy's Laboratories suffered a sharp reversal as the U.S. FDA denied its exclusivity for Oomeprazole. The stock, after losing nearly 20 per cent mid week, closed up by about 10 per cent. Mr. Contractor believes that stocks of multinational pharmaceutical companies will continue to improve gradually. Castrol came down sharply as about 50.8 per cent of the stock tendered in the open offer by BP AMOCO was accepted and the balance returned. Around 2.4 crore shares are now back in the market.

After experiencing high volatility in September, post-attack in the U.S., the last few weeks saw stability returning to the world financial markets. The stock markets around the globe have bounced back to pre-strike levels and even international oil prices, the most feared factor after the attack, have come down to reasonable levels which is positive for India. The governments worldwide announced series of confidence boosting measures, including increasing liquidity in the system and reducing interest rates.

The Indian Government also did it part and made announcements which were aimed at accelerating the reform process. The Reserve Bank of India has reduced the cash reserve ratio (CRR) and simultaneously cut the Bank Rate, 0 signalling an outlook of benign interest rates in the near term. The Government kicked off new initiatives towards privatisation of State-owned enterprises with the privatisation of CMC and Hindustan Teleprinters (HTL). The Government has indicated that it is looking at completing privatisation of more than ten public enterprises in the next 6 months and this should not only improve the fiscal situation, but also help improve sentiment in stock markets.

``The introduction of futures trading is expected to impart the much needed liquidity into the market and encourage participation by retail investors,'' ' Mr. Gopalakrishnan felt. According to him, the stock market has taken cognizance of the government measures and staged a remarkable turnaround. The quarterly results of companies have also showed indications of an economic recovery especially in the cement and automobile sectors. The results of technology and pharmaceutical companies, in particular, have been better than expectations. Thus the bullish sentiment is back on Indian stock markets once gain.

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