Markets Outlook: Buying in traditional stocks to keep Indian market firm

Monday, 02 June 2003, 19:30 IST
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MUMBAI: India's blue-chip shares are expected to gain strength further in the week ahead on value buying in stocks of old economy companies even as technology counters continue to reel under selling pressure on earning woes. Analysts and market traders say while banking shares may come under fresh selling pressure in the short-term after soaring sharply higher in recent trade, overall the market would stay firm on institutional buying in stocks of traditional firms. The market operators will also closely track the progress of monsoon next week before putting more money on blue-chip counters of old economy sector such as Hindustan Lever and Hero Honda Motors, they added. "We have had smart gains on the bourses in the last few sessions, mainly led by the banking stocks. The market index ended at an eight-week high Friday," said a fund manager with a foreign brokerage firm. "I don't expect the trend to change in the coming few sessions. Although the gains may not be as sharp as we have witnessed last week due to an expected profit taking in banking scrips, the overall market mood will remain positive." India's stock market benchmark 30-share Bombay Stock Exchange sensitive index or Sensex closed on Friday at 3,180.75, representing a gain of 130.91 points or 4.29 percent over its previous week's close. Traders say old economy shares may witness fresh institutional buying in the coming sessions on hopes that the country would get normal monsoon in the current year, boosting demands for industrial and consumer goods. Weather official said last week that the southwest monsoon would likely arrive at least several days late but the delay should not affect the amount of rain that falls during the June-September season. The take-off of rainfall activity in June is crucial for the agriculture sector, which employs 70 percent of Indians and accounts for a quarter of the gross domestic product. Hopes of normal monsoon has gained ground on the bourses despite Indian Meteorological Department's prediction that there was just 14 percent chance of normal rainfall this year and only three percent chance of excess rainfall. Global brokerage major Credit Lyonnais has trashed the metrological department's gloomy monsoon forecast, saying this year India may witness the La-Nina effect, the reverse of the El-Nino effect that was blamed for low rainfall last year. "The monsoon progress in the coming days is going to be very crucial for the market. If the progress of monsoon manages to meet investor expectation then it would act as a get positive trigger," said a broker with the Bombay Stock Exchange. In the intra-week trade ended Friday, the market opened the week higher on large-scale institutional buying in stocks of state-run firms on hopes that the government's privatisation programme would gather steam in days ahead. Hopes of the privatisation process picking up momentum in the days ahead gained ground after the government last week invited preliminary bids for an adviser to sell a 51 percent stake in Rashtriya Chemicals and Fertilisers. The market stayed in the positive zone for better part of the trading week on large-scale institutional buying in shares of old economy companies, especially banking stocks. Shares of state-run banks have staged smart rally in the last couple of weeks' trade on surge in borrowing, reduction in their labour force and moves to reduce bad loans, or non-performing assets. Increased buying by foreign institutional investors also boosted the stock market sentiment. Foreign investors remained aggressive last week as they registered net inflows of $106 million as of Thursday. For the month of May, foreign institutional investors have registered net inflows in equities worth $257 million. Technology stocks, however, continue to be badly hammered on fears that the rising rupee and tightening of U.S. visa policy norms would inflict more pains to the high-profile technology industry also dampened the market sentiment. India's blue-chip technology shares have come under severe selling pressure in the last few sessions on fears that the rising rupee would inflict more pains to the high-profile technology industry. Analysts say the unabated rise in the value of the Indian rupee against the U.S. dollar will badly pinch the earnings of the export-oriented Indian software makers in the current fiscal year. India's IT exports, including software development and services businesses, are estimated to have grown nearly 26 percent in the year ended Mach 31, 2003, down from a projected 30 percent growth due to the rupee appreciation. In the old economy sector, Tata Steel, the largest private steel maker, rose 8.6 percent over its previous week's close to 157.80 after it said Thursday profit in the fourth quarter surged 4.69 billion from 1.22 billion a year earlier. State Bank of India, the country's largest commercial bank, gained 3.04 percent to touch 352.30 on institutional buying interest.
Source: IANS
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