Foreign fund inflows to keep market firm in week ahead

Monday, 30 June 2003, 07:00 Hrs
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MUMBAI: The bull run on the Indian bourses, which propelled the benchmark market index to a 15-month high Friday, is expected to continue unabated in the days ahead on sustained foreign fund inflows.

Analysts and traders say though the market, which ended higher for the fifth consecutive week, may witness moderate technical correction after recent sharp gains, the overall trend would remain positive.

"In the last few weeks the market rally was basically helped by large-scale buying of heavyweight stocks by foreign institutional investors," said a fund manager with a foreign brokerage firm.

"And keeping in view the general scenario in mind, I don't think we will come across any factor in the week ahead that will put a brake on foreign investments," the fund manager told IANS.

"Increased foreign fund inflows coupled with hopes of a sharply higher economic growth in the current fiscal year will keep the market mood positive in the coming sessions as well."

The market index has smartly rallied for the past five consecutive weeks and has recovered substantially from a six-month low touched in April this year.

The market barometer 30-share Bombay Stock Exchange sensitive index or Sensex closed on Friday at 3,583.06, netting a gain of 83.56 points or 2.4 percent over its previous week's close.

With the market getting into a bullish phase, foreign institutional investors have sharply increased their allocation for the Indian market, say analysts.

The foreign funds are betting on higher Indian economic growth in the current fiscal year, helped by normal distribution of monsoon rainfall all across the country.

The quantity of rainfall in the June-September period is crucial for the farm sector that accounts for nearly a quarter of the gross domestic product and employs 70 percent of the country's over one billion population.

India's economy grew by only 4.4 percent in the fiscal 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.

Foreign funds, which acts as the backbone for India's liquidity starved market, have pumped in more than $2 billion into stocks and bonds so far in 2003, making it the fourth time in 10 years when net inflows have crossed the $2-billion mark.

Many traders believe that considering the current macro-economic situation and strong liquidity, the year may end up with record inflows by foreign institutional investors.

Analysts say the market mood is also likely to be boosted by the listing of shares of India's largest carmaker Maruti Udyog Ltd. on the Bombay Stock Exchange and National Stock Exchange in the week ahead.

Shares of Maruti, which Thursday concluded a highly successful initial public offering (IPO) of 72.24 million shares, are likely to be listed on domestic bourses at 125.

The Indian government, which holds 45.8 percent stake in Maruti, a unit of Japanese automobile giant Suzuki Motor Corporation, is divesting 25 percent equity in the company through the IPO.

In the intra-week trade, the market opened the week on a negative note with institutional investors, both domestic and foreign, rushing to book profit in stocks of heavyweight companies that had risen sharply higher in recent trade.

Blue-chip equities, however, bounced back with a vengeance after a couple of day's downward trend with institutional investors rushing to enlarge position on heavyweight counters.

It continued to surge higher for remaining part of the weekly trading sessions and closed the week Friday by touching a 15-month high.

While buying in old economy stocks was triggered by hopes that normal monsoon rains this year would boost the country's economic growth, technology shares also saw renewed buying on a sustained rally in U.S. markets.

In the old economy sector, Grasim Industries gained 12.7 percent over its previous week's close to touch 512.85 following large-scale domestic and foreign institutional buying interest.

Grasim Industries is set to become the country's leading cement firm when it gains control of rival Larsen and Toubro's cement division.

Ranbaxy Laboratories, India's largest drug maker, rose five percent to 512.85 on hopes that generic sales will rise after the U.S. approved a bill that will make it harder for branded drugs to stave off competition from cheaper copycats.

In the tech sector, Infosys Technologies, India's largest listed software exporter, closed with a weekly gain of nine percent at 3,334.50 following a sharp rally on the tech-laden Nasdaq stock exchange.
Source: IANS
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