The Hindu : FII investments push market into bull orbit

Online edition of India's National Newspaper
Monday, Jun 09, 2003

Business

Business

FII investments push market into bull orbit

SUSTAINED BUYING in frontline old and new economy stocks by institutional investors and the imminent arrival of the monsoon helped the market to close the week on a cheerful note. There was a broad-based rally as retail investors and domestic institutions chased dividend stocks with high yields. There were also large net inflows of foreign institutional investments.

Disinvestment reports and bagging of overseas orders by some of the IT companies were the other factors aiding the bullish sentiment.

On Friday, the Sensex crossed the 3300-mark for the first time in three months. After hitting a high of 3313.54 during the day, it settled at 3303.24 against the previous weekend's close of 3180.75, a rise of 122.49 points or 3.8 per cent.

Index heavyweight Reliance and software bellwether Infosys along with State Bank of India were major gainers.

The smart rally in Reliance was triggered by news that the company had discovered large gas reserves in Madhya Pradesh, the company's first onshore gas find. The scrip touched a 52-week high of Rs. 313.

SBI went up on reports that the Government might remove GDR holdings from the present 20 per cent cap on foreign investments. At present GDR holders hold about 8 per cent of SBI's equity, while the total foreign holding is 19.3 per cent. Market circles expect the bank to post excellent working results on June 19.

Refinery stocks continued their recent good run with several stocks touching 52-week highs on the back of fund buying. HPCL surged on divestment hopes. The board of directors of Indian Oil Corporation has recommended a bonus issue in the ratio of one share for every two equity shares held. IBP, the oil marketing major, touched a new 52-week high of Rs. 480.95 on sustained buying support.

Select auto and auto-ancillary stocks witnessed fresh buying support. Telco gained on the back of positive outlook on the monsoon and the growth in the commercial vehicles segment. Hero Honda moved up on reports of higher sales in May. Gujarat Ambuja, ACC, Larsen & Toubro and Grasim recorded gains on expectations of higher cement offtake.

Renewed interest in technology stocks reflected buoyancy on the Nasdaq Exchange. The technology sector, which has been range bound for the last couple of weeks, seems to be catching up along with other sectors on the back of gains in Nasdaq. Mastek gained on rumours of a $10m order from a U.S.-based client.

Shares of the media and entertainment sector too recorded gains. Zee Telefilms rose following reports from the company that it had plans to launch three new systems as part of its bouquet for the conditional access system in order to rope in more viewers. Bharti Tele-Ventures announced its plans for U.S. listing during the next financial year.

The controversy over the return of equity to the Government by some banks led to profit-taking in public sector banking stocks. Punjab National Bank were the worst hit with the stock being locked at the 20 per cent lower circuit followed by Canara Bank (down 15.3 per cent). The volatility in bank shares is likely to continue till the uncertainty is over.

Pharma stocks were in demand on hopes of strong exports. Aurobindo Pharma gained on news that it was planning to file around 12 drug master files with the U.S. Food and Drug Administration.

The Chennai-based Orchid Chemicals has entered into a supply and marketing agreement with the the U.S.-based Apotex Corporation for sale of its generic cephalosporin and other injectable products in the U.S. Shasun Chemicals touched a 52-week high following the announcement that it had signed a deal with U.S.-based Eli Lilly for the manufacture and supply of the anti-tuberculosis drug, Cycloserine, in India.

FII inflows were the highest in May. Even for the first four sessions of June, they were net buyers to the extent of Rs. 470 crores. The large FII inflows also added to the positive market sentiment.

Rupee climbs 2-year peak

The rupee touched a 2-year high against the dollar, closing at 46.87/88, higher than its previous close of 46.90/91, a 23 paise gain from previous weekend levels, after hitting a high of 46.81/82 on hectic exporter dollar sales.

Most of the rupee's strength continues to be derived from the international markets and specifically from the euro's strength.

However, both in the international and domestic markets there has been more confusion than clarity making even near-term forecasts of the dollar-re extremely tricky. The Indian forex market has been thin, which makes for more volatility with relatively small forex orders swinging the rates.

Firm trend on gilt yields

Gilt yields continue to be soft with the 10-year paper quoting at 5.75 per cent and the five-year paper at 5.35 per cent. Expectations of a repo rate cut rose consequent on the European Central Bank (ECB) reducing its rates by 50 basis points.

However, Reserve Bank of India sources said they would like to wait and watch as the Indian inflation level was still higher as compared to European inflation.

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