Bullish sentiment prevails on bourses

THE FINANCE Minister's projection of a robust outlook for the economy while presenting the quarterly statement on the economy and budget for April-June boosted sentiment on bourses last week. Mr. Jaswant Singh has said that the economy was on a high growth path as the result of a good monsoon, drop in inflation rate, burgeoning forex reserves and steady growth in exports.

Several bluechip counters witnessed hectic buying on a market which witnessed allround buying by institutions and retail investors.

The Bombay Stock Exchange 30-share sensitive index witnessed wide fluctuations moving between 3890.78 and 3722.08 before closing higher at 3883.76 against the previous weekend close of 3815.31, a net rise of 68.45 points. The Sensex overcame early strong resistance and rallied sharply in the last two sessions going up by 1.79 per cent to a 29-week high. In the last two trading sessions alone, the index gained 142 points.

Both foreign and domestic institutions were buyers in response to the FM's statement. Foreign institutional investors made net purchases of Rs. 119 crores in the first four sessions.

Among heavyweights, Reliance, Hindustan Lever, ITC and Tata Motors firmed up on institutional support. Institutional investors were seen picking up huge volumes of Hindustan Lever.

Stocks of public sector enterprises, especially oil and gas, were in the limelight. HPCL, BPCL, IOC, ONGC, Kochi Refineries and IBP gained ground on buying support.

The Inter-Ministerial Group (IMG) on Disinvestment has approved the appointment of a U.S. accounting firm for divestment of the Government's 25 per cent holding in BPCL through a public float in the American market. The IMG favoured simultaneous offering of 10 per cent equity in the domestic market and 25 per cent through American Depository Receipts (ADR).

ONGC went up after the company announced plans for a deep sea exploration project, Sagar Samriddhi, to search for oil at depths of 3,000 metres in the sea. Other PSE oil scrips such as Mangalore Refineries, Bongaigaon Refineries, Kochi Refineries and Chennai Petroleum posted gains.

BHEL stocks went up on its bagging a Rs. 400-crore order from Hindustan Zinc for a 154 MW power plant.

Maruti Udyog went to up to a new high during the week. The company announced better than expected sales in July. There were buyers in Ashok Leyland after reports of a $16 million order from Sri Lanka.

Tata Motor moved up on the news that it had sold more vehicles in July. Domestic sales of trucks and buses rose by 59.8 per cent.

Kinetic Engineering gained after the company launched four new aggressively priced motorcycles as part of its product portfolio expansion.

Stocks of auto-ancillary companies too have been gaining ground on hopes of a pick-up in demand for auto components.

Pharma pivotals witnessed a mixed trend. Wockhardt gained on buying support after the company launched the first locally developed insulin in the domestic market. The company's recombinant human insulin brand, Wosulin, is cheaper than other human insulin brands available in the Indian market. Stocks of Cipla witnessed selling pressure after it denied rumours of a bonus issue.

There was aggressive selling in Moser Baer and the stock hit the 20 per cent lower limit of the circuit breaker on the BSE on Tuesday after S. R. Batliboi & Co., an associate of Ernst & Young, the company's erstwhile auditor, refused to certify its balance sheet on differences of opinion over the accounts. But it ended higher after the company announced the appointment of K. C. Khanna & Co., as its new auditor.

After acquiring 51 per cent in Quintant Services, iGate Global Solutions (IGSL) announced that it would form a joint venture with Software AG of Germany and open an office in France.

Telecom stocks, however, witnessed a mixed trend with MTNL and Bharti Telecom showing modest losses and VSNL registering moderate gain. The dismissal of the cellular operators' petition challenging the Government's decision to allow WLL mobile services as part of the basic telecom services licence had a favourable impact on Reliance and Tata Telecom shares.

On hopes of increase in demand, cement stocks rallied. ACC, L&T and Grasim finished higher.

Nestle India ended higher on fresh buying support. A block deal of six lakh shares took place on the counter on the BSE, at Rs. 600 per share. On hopes that the company's Swiss parent, Nestle SA, may continue to hike its stake in its Indian subsidiary, the stock has been rising. Recently, the parent hiked its holding to 59.8 per cent through the creeping acquisition route.

Madras Fertilizers ended higher on reports that the Murugappa group, Zuari Fertilizers, Indo Gulf Fertilizers, Sterlite, IFFCO, Deepak Fertilizers, and foreign companies like Foskor of South Africa and GCT of Tunisia have submitted their expressions of interest to acquire the Government's stake in the company.

Domestic aluminium prices were hiked in line with firm international prices. As a result, Nalco, Hindalco and Madras Aluminium scrips ended higher. The steel sector was in the limelight on the back of firm international steel prices. Tisco and SAIL ended firm on good institutional support.

Breaching the crucial 46 to a dollar barrier, the Indian currency spurted to over 34-month peaks to 45.95/96 a dollar on the back of robust trade and capital inflows, before strong intervention by the central bank and renewed dollar demand from corporates partly curtailed its gains.

The rupee ended at 46.01/02 a dollar, still a whopping 15-1/2 paise rise from the previous weekend levels of 46.1650/1750 after volatile trade at the interbank foreign exchange market during the week.

Strong trade and investment inflows mainly contributed to the rupee's vigorous strength which was further augmented by firms bringing in cheap funds borrowed abroad amidst a relatively weak dollar overseas.

Interest rates fell further during the week. The 10-year government security was trading at 5.56 per cent and the 5-year security at 5.19 per cent against 5.61 per cent and 5.22 per cent in the previous week.

The yield on fresh government borrowing for the 25-year stock (Rs. 3,000 crores) was 6.01 per cent and for the 8-year floating rate stock (Rs. 6,000 crores) 5.03 per cent. The year-on-year inflation moved down to 4.59 per cent during the week ended July 19.

Corporate Bureau