Financial Daily from THE HINDU group of publications
Friday, Dec 03, 2004
Markets - Stock Markets
Sensex, Nifty scale new peak Fall in crude prices, FII buying add to the rally
Mumbai , Dec. 2
THURSDAY turned out to be a landmark day on the bourses. Both the Sensex and the Nifty scorched all earlier records, with the BSE benchmark index breaching for the first time-ever 6,300, to close at 6,328.43. The Nifty also marked the occasion with a provisional closing above the 2,000-point level.
Several factors propped up this dramatic performance by the indices, including the good news of a drop in crude oil prices, continued interest by foreign institutional investors and the conviction that the current bull rally is one based on sound fundamentals.
The Sensex and the Nifty posted gains of 1.62 per cent and 1.88 per cent respectively. The Sensex rose 100.60 points during the day and the Nifty, which closed at 1999, gained 36.95 points.
Will it sustain?: With markets gaining close to 5 per cent in as many days of trading, the overbearing question was one of sustainability.
"This does look like a sustainable rally. There would be intermittent corrections, but the market still has a lot of steam. This is the point where markets could consolidate and take 6,000 as a strong base," said Mr Rakesh Kumar, Head (Equities), Pranav Securities.
Valuations are still attractive, especially on the `A' group stocks. Another pertinent point of this rally is that all sectors are participating and some sluggish ones have been revived as well, according to Mr Kishen Choksey, KR Choksey Shares and Securities Pvt Ltd.
But analysts who trade on the side of caution are talking about the markets getting overheated at these levels. On the whole, there continues to be cautious optimism as against "irrational exuberance."
Market participants are also wary that at the current level, the market may have taken into account forward earnings till March 2005. "If actual earnings of the current quarters are below expectations, sentiments could be seriously affected," said an analyst.
While the fall of crude oil futures to below $45 added to the market sentiment, buying support continues to be provided by FIIs, who have pumped in net investments of Rs 2,236 crore over the last four days.
Brokers see the high FII activity as a means to boost their year-end net asset value, as this would help in making higher allocations to their India portfolio for the next year.
Volumes were moderate on Thursday at the BSE, clocking 24.58 crore shares at Rs 2,692.94 crore. However, at the NSE, 44.33 crore shares, worth Rs 6,650 crore, were traded.
Expectedly, with the drop in crude prices, energy stocks bolstered trading.
There is also expectation of declaration of interim dividends by some of these companies.
Banking stocks also had a good day at the bourses. SBI witnessed heavy buying.
The scrip moved from Rs 540.60 to Rs 581.70, up by over Rs 41 during the day's trade.
Cement and textile scrips have made a comeback at the bourses.
Reliance shares also continued their positive run of the last couple of days.
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