The Hindu : Undertone remains positive

Online edition of India's National Newspaper
Sunday, Jul 07, 2002

Business

Business

Undertone remains positive

By Oommen A Ninan

MUMBAI JULY 6. The mood on the stock markets turned positive last week on expectations of fairly good first quarter performance across the board. The change in leadership of the Finance Ministry was also welcomed with the new Finance Minister, Jaswant Singh, making the right noises and offering to continue the reform process. The market views Mr. Singh as a liberal and sees no reason for any change in the direction initiated and followed by his predecessor.

"I feel that lot of investment is coming from retail investors particularly in small and mid-cap stocks. I see the investor confidence going up gradually, said Motilal Oswal, Chairman and Managing Director of Motilal Oswal Securities. The benchmark Bombay Stock Exchange 30-share sensitive index (Sensex) closed at 3330.61, up 85.91 points during the week ended July 5 against 3244.70 in the earlier week. On the National Stock Exchange, the S&P CNX nifty also closed up 16 points at 1073.80 against 1057.80. The market ended the week with some modest gains on the back of a recovery on the last day of trading and a surge in Sensex heavy weight, ITC, due to sustained institutional buying. ITC has a 6.7 per cent weightage in the Sensex and ended up 2.62 per cent at Rs. 720 on speculation that Unit Trust of India was close to finalising a deal to sell its holding in ITC. The market witnessed buying in select automobile pivotals on expectations of strong first half results which also led the rally.

The broad market was quite firm as investors continued value buying across small and mid-cap stocks in sectors such as construction, textiles, auto ancillaries, power, chemicals, paints, engineering and sugar. The undertone of the market has turned positive as operators are betting on strong first quarter results in steel, cement and automobiles. Tech stocks also witnessed a recovery on expectation of good first quarter results.

A rare phenomenon is under way at the Indian inter-bank foreign exchange market; the rupee is growing stronger against the U.S. currency while the money market is awash with liquidity. Interestingly, liquidity in the money market has always been used for speculation in the forex market. In the last few days, the rupee was gaining against the dollar and it is now around 48.80 a dollar against 49.10 a few weeks ago. It closed at 48.83/84 during the week. While the dollar's weakness against other major currencies was cited as one reason, a good inflow of foreign exchange is also checking the fall of the rupee against the dollar. The rupee is continuing to remain stable, aided by a favourable balance of payments position.

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