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Indian share market to track foreign fund inflows in week ahead
Monday, 01 December 2003, 20:30 IST
MUMBAI: India's blue-chip equities are likely to take the cue from foreign fund inflows in the week ahead with local investors hoping that the overseas money would continue to find its way into the domestic trading ring.
Analysts and traders say while the overall market fundamentals continue to be positive, further gains on the bourses will depend on the investment pattern of the foreign institutional investors in the days ahead.
Foreign institutional investors, which form the backbone of India's liquidity starved capital market, have pumped nearly $5.3 billion into Indian stocks so far in 2003, seven times its investments in the whole of 2002.
"As the stock market enters into the last month of the current calendar year, the investor mood is cautiously optimistic," said a fund manager with a foreign brokerage firm.
"The market will basically be swayed by the trading pattern of the foreign funds, which have so far played the role of very aggressive buyers in the domestic market," the fund manager told IANS.
"At this point of time, it is difficult to predict what will be their investment pattern like."
India's benchmark 30-share Bombay Stock Exchange sensitive index or Sensex closed for the week Friday at 5,044.82, netting a gain of 206.28 points or 4.26 percent over its previous week's close.
While a section of dealers believe that the foreign fund inflows would taper off next week as majority of overseas equity managers go on yearend holidays, others feel prospects of higher economic growth would ensure large-scale buying.
In its mid-year economic review, the Indian government says the economy in the current fiscal year would register a growth of over seven percent on increased agriculture production and industrial activity.
Indian economy grew by a moderate 4.3 percent in the year ended March 31, 2003, mainly due to a 3.1 percent fall in agriculture produce, as the worst drought in three decades ravaged large parts of the country.
A Crisil study report, however, says the stock valuations in the Indian market show "signs of having reached plateaus" and large gains during the rest of the year are unlikely.
On the domestic stock market boom, the study said the gains had been largely driven by a huge infusion of foreign funds into the trading ring.
Foreign institutional investors tend to book profits towards the end of the calendar year, so some softening of prices can be expected then, said the Crisil report.
Analysts say the trading pattern in the days ahead would also be determined by the outcome of state assembly elections next week.
Assembly elections Monday will have an impact far beyond the boundaries of the four states, with experts saying the outcome would decide the fate of crucial economic reforms.
Delhi, Rajasthan, Chhattisgarh and Madhya Pradesh go to the polls Monday. The battle is mainly between the Congress party that rules all four states and Prime Minister Atal Bihari Vajpayee's Bharatiya Janata Party (BJP).
The elections are seen as the final popularity test ahead of next year's general election.
A setback for the BJP would rob the Vajpayee government of the confidence to continue to take politically sensitive decisions such as cutting farm subsidies and privatising state firms, say experts.
In the intra-week trade ended Friday, the market opened the week Monday on a negative note on profit taking in heavyweight stocks by domestic investors as well as select foreign institutional investors in a volatile trading session.
It, however, managed to stage smart recovery in the following session following large-scale buying in technology stocks by domestic investors and select foreign institutional investors.
The market index closed in the positive zone in all the remaining sessions.
In the intra-week trade, the market mood got a boost after nuclear rivals India and Pakistan agreed to observe a ceasefire along their troubled border in Jammu and Kashmir from midnight Tuesday.
In the old economy sector, Reliance Industries, India's largest refiner and petrochemicals maker, closed with a gain of nearly six percent over its previous week's close at 
487.90.
In the technology sector, Infosys Technologies, the largest listed software exporter, ended 5.4 percent higher at 4,924.50 and Wipro closed with a gain of 6.1 percent at 1,538.90.
Source: IANS
487.90.
In the technology sector, Infosys Technologies, the largest listed software exporter, ended 5.4 percent higher at 4,924.50 and Wipro closed with a gain of 6.1 percent at 1,538.90.
Source: IANS