Business

Bourses ignore inflation numbers

DESPITE A steady rise in inflation and fresh surge in global oil prices, across the board buying was in evidence on the bourses last week, especially in the last trading session. The Sensex ended the week on a healthier note. Led by fast moving consumer goods (FMCG) and health care segments, shares extended their gaining streak to the third successive week.

Equities resumed on a firm note for the week and continued their upward march throughout on sustained buying. Increased foreign institutional investor activity led to a smart rally. There was also increased buying from retailers and operators in keen expectation of better second quarter results from a number of counters in steel, cement, automobile and IT sectors. Mid-cap counters came to the fore and attracted fresh buying even though some churning of portfolios was witnessed towards the end as investors shifted their focus from mid-caps to heavyweight counters.

Buying interest was attributed to the Finance Minister's statement that interest rates were likely to remain stable in the medium term. The data released by the Government on industrial production also aided sentiment.

The Sensex shot up by 2.9 per cent to close at a four-month high of 5370.05. Tracking the positive advices from Nasdaq, IT counters also were in keen demand.

Earlier during the week, buying was seen in auto, banking and metal stocks at rising levels. In the FMCG segment, Hindustan Lever and ITC provided solid support to the index. Other frontline and index heavyweight stocks such as Infosys Technologies, HDFC, Tisco, Reliance Industries and State Bank of India too joined the race.

State-owned banks attracted noticeable buying interest. Bank of Baroda and Union Bank were among major gainers.

Meanwhile, the Reserve Bank of India on Saturday had raised the cash reserve ratio (CRR) by half a percentage point to 5 per cent of their net demand and time liabilities (NDTL), in two stages beginning fortnight September 18. The CRR would go up to 4.75 per cent from 4.5 per cent of NDTL effective fortnight beginning September 18 and subsequently to 5 per cent from fortnight October 2.

Pharma stocks attracted significant attention. Cipla gained on reports that the company was likely to begin export of its chlorinated fluorocarbons (CFC)-free budesonide inhalers to the European market. According to reports, one of Cipla's alliance partners for the product had received regulatory approval in Germany.

ITC turned firm on reports that the Supreme Court had allowed the company's appeal, quashing the Rs. 800 crore demand on it by the excise department. In stock specific activity, Zee Telefilms was subdued on reports that the Bombay High Court had suggested that ESPN-Star Sports and Zee Television submit fresh bids to the Registrar General of the High Court and said that the highest bidder would bag the telecast rights of national and international cricket matches to be played in India between October 2004 and September 2008.

Some of the auto shares that were in the limelight at the early stages reacted on profit-taking following a fresh rise in global crude oil prices. Tata Motors recorded a decent sales growth of 19.7 per cent in August. Commercial vehicles, its mainstay, grew 14 per cent. The biggest draw was exports, which more than doubled. Hero Honda lost ground after Honda Motor of Japan announced that it would start selling the Unicorn motorcycle in India from next month. The company's entry is expected to increase competition in the crucial segment. In fact, weakness was seen across auto stocks.

Steel counters, led by Tata Steel, surged aided renewed buying on reports of worldwide growth in the sector. Other four steel companies are also expected to announce better results if the current trend is any indication, brokers said. Metal stocks continued their upward journey. They have been in the limelight on the back of strong demand and uptrend in metal prices.

Rupee firms up

The Indian currency scaled an 18-day peak against the U.S. currency at 46.2650/2750 a dollar on the back of a steady stream of trade and foreign funds inflows amidst renewed weakness of the dollar against major rivals. In generally quiet and range-bound trade during the week, the rupee ended at 46.2650/2750, a three paise gain from the previous weekend level after overcoming early pressures, on reduced dollar supplies owing to Monday's Labour Day holiday in the U.S.

Initial pressures on the rupee took a toll of 6-1/2 paise, but it later staged a smart rally and even posted fresh gains in spite of surging oil prices and rising inflation, dealers said.

Interest rates stable

The year-on-year inflation rate moved up to 8.33 per cent for the week ended August 28. Interest rates were stable despite higher inflation as the market expects inflation to ease in the coming weeks. The ten year government security was traded at 5.93 per cent and the five year security at 5.84 per cent.

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