BUSINESS

Improved sentiment on bourses

ENCOURAGING FINANCIAL performance by most blue chip companies in the first quarter and increased participation by foreign institutional investors kept the bourses extending the winning streak to a fifth straight week. The excellent response to Tata Consultancy Services' initial public offer during the week and the smooth expiry of July derivatives contract also aided sentiment.

The Government's decision to grant the oil PSUs limited freedom to fix fuel prices within a band and the central bank's decision to maintain its inflation outlook of around 5 per cent for the 2004-05 fiscal also had a sentimental impact on the market which ended on a positive note. Most of the gains were recorded in the last two trading sessions. The gains, however, were trimmed by late profit booking at higher levels by day traders and retail investors.

There was relatively increased FII activity last week, taking the total inflow to Rs. 1,099 crores in July against their pull out to the tune of Rs. 3,272 crores in May and meagre net investments of Rs. 312 crores in June. Their activity is expected to increase further in the coming months with the registration of about 50 new FIIs with the Securities and Exchange Board of India in the last three months.

Domestic mutual funds remained net sellers with a net sale of Rs. 324 crores in the first four sessions of the week.

In scrip-specific trading, the BSE benchmark 30-share index witnessed wide fluctuations between 5200.85 and 5024.23 before ending the week at 5170.32 against the previous weekend close of 5073.34, a net rise of 96.98 points.

During the week, key stocks such as Reliance, Tisco, Tata Motors, ONGC, ITC, Hindalco and HPCL were prominent gainers on heavy buying by institutional investors. However, SBI and HDFC suffered a sharp setback on selling pressure from operators. Sharp to moderate gains were recorded by steel, cement, IT and petroleum stocks which had a positive impact on the index.

On the National Stock Exchange (NSE), the S&P CNX Nifty and the S&P CNX Defty shot up further by 30.70 points and 44.50 points to close the week at 1632.30 and 1244.15. During the week, the volume on the BSE and the NSE rose sharply to Rs. 12,126 crores and Rs. 23,462 crores from Rs. 9,098 crores and Rs. 20,079 crores in the previous week.

Index heavyweight Reliance were active in the last two trading sessions on strong buying support.

Among IT stocks, Infosys Technologies, Satyam Computer and Wipro were in demand.

In the oil segment, ONGC, HPCL, IOC, BPCL, GAIL and IBP posted marked gains.

Despite positive results, state-owned banks were mixed. State Bank of India and Punjab National Bank remained weak but ICICI Bank and HDFC Bank closed firmer. IDBI Bank and IDBI moved up following the proposal to merge the former with the latter.

Private sector banking stocks were weak after the GTB fiasco. The Reserve Bank of India announced the amalgamation of Global Trust Bank with Oriental Bank of Commerce. OBC had made the merger offer as it perceived synergy between the two banks. The merger will be effective once the Government sanctions the scheme.

Steel counters, which had met with strong demand after the announcement of first quarter results by Tata Steel, continued to look up after SAIL also reported impressive results along with others such as Jindal and Ispat. Cement counters registered gains despite apprehensions that the second quarter results might not be encouraging as demand generally remains sluggish during the monsoon months.

Among auto stocks, Tata Motors suffered a sharp setback despite improved results and the plans to enlist the shares on the New York Stock Exchange. Maruti Udyog and Mahindra and Mahindra were under selling pressure. However, these stocks bounced back at the fag end of the week on good buying support.

Among pharma stocks, Dr. Reddy's and Ranbaxy remained weak. Lupin, Nicholas Piramal and Glenmark closed higher.

Rupee under pressure

Despite a late pull-back rally on strong trade inflows, the Indian currency remained under severe pressure against the U.S. currency and tumbled to a over one-year low, pulled down by sustained heavy month-end dollar demand from corporates and importers amidst thin supplies.

In choppy but nervous trading last week, the rupee ended at 46.43/45 a dollar, sharply lower from the previous weekend level of 46.3250/3350, but off the 13-month trough of 46.46/47 struck at the close on July 29.

Nervousness gripped the forex spot trade for the better part of the week, as global demand for dollars fuelled heavy buying of the greenback from large oil companies and importers on the back of the customary month-end pressures. Dwindling dollar supplies due to a slowdown in foreign fund inflows and soaring crude oil prices also weighed heavily on the rupee value.

Interest rates up

The week ended with higher interest rates after some volatile movements. The inflation rate remained at 6.52 per cent for the week ended July 17.

However, interest rates moved up on expectation of higher inflation in the wake of firm oil prices and higher global interest rates.

The ten-year government security was traded at 6.15 per cent and the five-year security at 5.80 per cent.

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