The Hindu : MUL's debut enlivens sentiment

Online edition of India's National Newspaper
Monday, Jul 14, 2003

Business

Business

MUL's debut enlivens sentiment

THE MUCH awaited listing of the biggest IPO maker Maruti Udyog, an impressive performance by IT bellwether Infosys Technologies and the announcement of fresh initiatives under the Government's disinvestment programme buoyed sentiment in stock markets last week. Overall, the market gained almost 2 per cent during the week. Foreign institutional investors stepped up their purchases.

The BSE benchmark 30-share index rose past the 3700-mark in intra-day on July 11, but closed at 3676.26 for the week, with a gain of 53.92 points over the previous weekend close of 3622.34. This was the seventh consecutive weekly rise for Sensex.

Maruti Udyog, which made its debut on Wednesday, opened 25.6 per cent higher over its IPO price of Rs. 125 per share. The stock rose to a high of Rs, 174.80 on Friday. Sentiment in the stock had been boosted by its simultaneous inclusion in the futures and options segment, the first time a stock is included in the F&O segment on the first day of listing.

According to sources, both domestic and foreign institutions are acquiring the stock in the secondary market as they did not get shares in the IPO. In the allotment of MUL shares, the Centre had favoured retail investors with a larger quota.

In line with the Nasdaq rally, technology stocks went up during the earlier part of the week on strong inflows from foreign institutional investors. The Infosys results and guidance for current year beat market expectations, reviving confidence in the technology sector. Satyam, Hughes Software, i-flex, Infotech Enterprises posted handsome gains. But on Friday most stocks witnessed profit taking and surrendered most of their gains.

The Government has cleared the sale of its residual equity in CMC, IBP, Indian Petrochemicals Corporation, Videsh Sanchar Nigam and Bharat Aluminium Corporation through the strategic sale route , subject to the existing strategic partners agreeing to the proposal.

The Cabinet Committee on Disinvestment also approved the sale of the Centre's stake in three public sector enterprises — National Fertilizers, Dredging Corporation of India and Hindustan Copper.

In the banking sector, both public and private, renewed buying interest was seen and UTI Bank, particularly, went up to a new high on rumours about the sale of its stake by UTI at a substantial premium over its current market price.

Auto stocks were back in demand with substantial gains for Telco. Rane Brake Linings has bagged a major Sri Lankan Railway order. Hero Honda has reported a 13.4 per cent jump in net profit for the first quarter of 2003-04. Steel stocks continued to witness action with Tisco and SAIL ending in the positive territory.

The firmness in international aluminium prices is likely to benefit Hindalco, Nalco and Balco with export earnings.

Hindalco surged on sustained support. Nalco rose following developments on the disinvestment front.

In the pharma sector, Wockhardt announced the acquisition of CP Pharmaceuticals of the U.K., to become the largest Indian pharmaceutical company in the U.K.

The market sentiment remained bullish, helped by strong inflows from foreign institutional investors. Till June end, the FIIs have made net investments of over Rs. 6,000 crores and have remained net buyers till date with purchases of Rs. 1,171 crores in eight sessions between July 1 and 10.

Rupee at 34-month high

The rupee has been not only holding its gains but has also risen further against the dollar. It reached a 34 month high of 46.1050/1150. Sustained FII flows and the quicker realisation of export proceeds are noticeable factors aiding the rupee. Barring central bank intervention, the rupee seems likely to move up further to around 46. The dollar is further handicapped by the release of less than satisfactory economic data.

Debt market steady

There were no major changes in the interest rate scenario. The ten-year government security was traded at 5.72 per cent and the five-year security at 5.28 per cent. The year-on-year inflation moved up to 5.21 per cent during the week ended June 21.

Due to abundant availability of funds, the market expects a reduction in the repo rate soon. Banks invest their surplus funds with the Reserve Bank at the repo rate, which is now ruling at 5 per cent. Meanwhile, the Government has announced a borrowing of Rs. 9,000 crores and the auction for the same would be held on July 15.

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