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Renewed FII buying restores confidence
THE BETTER than expected performance by many corporates in the current year boosted sentiment in the stock market last week. While there was profit booking in select counters and modest correction in the first two trading sessions, subsequent sessions witnessed hectic buying that led to a sharp rally in old and new economy heavyweights. Sustained buying by institutional investors aided sentiment.
The BSE-30 share sensitive index opened the week slightly better at 3655.26 against the previous weekend close of 3647.58 but dropped sharply to a low of 3534.06 on Tuesday.
However, fresh sustained buying lifted the Sensex to a high of 3737.76 by Friday before the index closed at a 26-month high of 3726.46, a net rise of 78.88 points for the week.
Maruti Udyog, Telco, Tisco, Satyam, SBI, Ranbaxy, ACC, ITC and GE Shipping announced excellent quarterly results and stocks of these counters witnessed fresh buying. Fund buying was seen in heavyweights such as Reliance, HLL, ITC, SBI and Infosys.
IT stocks turned firm after Satyam Computer posted better than expected results for the first quarter. The revenue guidance for the full year was raised to 18-20 per cent growth in dollar terms from the earlier 15-17 per cent.
The bottomline guidance has been maintained at the same level in rupee terms against the market expectation of a downward revision. The Reserve Bank of India has approved an enhancement in the FII limit in Satyam stock to 60 per cent.
Infosys, Wipro and HCL Technologies ended in positive territory. HCL Technologies gained on its bagging a multi-year, multi-million dollar collaborative IT co-sourcing contract with AMD. A long-term contract has been signed by Infotech Enterprises and Tele Atlas NV of Netherlands to provide map data conversion services and Infotech will deploy data specialists to work on various projects for Tele Atlas over the next three years.
The market is awaiting the Supreme Court verdict on whether Parliament approval is mandatory for the disinvestment programme of the Government. Any negative development may dampen market sentiment.
Indian Oil Corporation and ONGC Videsh have tied up with BP and Occidental, the global oil majors, to bid for producing oil fields in Kuwait.
On Friday, the British Government-owned investment institution, Commonwealth Development Corporation (CDC), got the Punjab State Cabinet nod to buy 23.49 per cent stake from the Government in Punjab Tractors for Rs. 218.13 crores. CDC is paying Rs. 153 per share.
Bank shares witnessed fresh buying following good quarterly results from State Bank of India.
The scrip touched a new high of Rs. 427.10. IDBI gained on reports that the parliamentary standing committee on finance had approved the repeal of the IDBI Act, paving way for conversion of the financial institution into a bank.
On the back of reports that an internal committee of the Union Finance Minister has observed that the FDI and FII stakes in banks are distinct and has recommended that the two be treated separately, scrips of public sector banks surged on active buying. Private sector banks too were relatively strong on hopes that the Centre would amend the Banking Regulations Act in the current monsoon session of Parliament and would remove the 10 per cent ceiling on voting rights in these banks.
UTI Bank witnessed a smart rally after market rumours of a private placement and stake sale by its parent UTI. The scrip touched a 52-week high of Rs. 80. ICICI Bank reported impressive performance in the first quarter. Buying was seen in ING Vysya counter on reports that the parent bank would hike its holding.
Pharma major Ranbaxy reported better than expected second quarter results. Selective buying was seen in other pharma stocks also. Bharti Tele-Ventures gained on the back of excellent results.
There was fresh buying in auto and auto-ancillary stocks as also in several cement, FMCG, telecom, and media shares.
Rupee strengthens
The rupee is expected to resume its appreciation against the dollar to around the 46 level despite the massive dollar buying by Indian banks and the improved signals for the U.S. economic recovery.
In fairly active trading during the week, the rupee ended at 46.1250/1350 a dollar, a remarkable turnaround from the low of 46.28/29 logged on Monday and a nearly 14 paise gain from the previous weekend level of 46.26/27.
Debt market easy
Interest rates on debt instruments have marginally fallen due to high liquidity in the system. The 10-year government security was trading at 5.66 per cent and the 5-year security at 5.22 per cent, as against 5.71 per cent and 5.26 per cent respectively in the previous week.
The year-on-year inflation rate moved down to 5.15 per cent for the week ended July 5. The Government's offer to banks swap high coupon securities with the lower ones has not met with much success as the premium offered was not found attractive.
Meanwhile, the Reserve Bank of India has announced fresh borrowing of Rs. 8,000 crores by State governments for prepaying their high coupon loans.
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