Markets Outlook: Blue-chips set for choppy trade

Monday, 25 November 2002, 08:00 Hrs
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MUMBAI: Blue-chip equities in the Indian market are set for choppy trade in the week ahead as investors lock in gains after a powerful six-day rally fuelled by large-scale fund buying mainly in technology stocks.

Analysts and market traders say a pause is expected after six consecutive strong sessions during which the stock market benchmark index surged some 180.95 points or 6.1 percent, but the modest pullback will not affect the current momentum.

"The improved news on the corporate fronts, especially in the technology sector, has helped sustain the market's upward momentum in the last couple of week's trade," said a fund manager with a foreign brokerage house.

"The momentum at this stage is clearly on the upside. We will, however, see some profit booking in the days ahead as fund investors rush to pocket gains after the recent strong rally," the fund manager added.

"But I don't see the profit booking creating a negative sentiment on the bourse in the short to medium term. A brutal bear market appears to have bottomed out and the market looks poised for sustained recovery."

India's share market barometer 30-share Bombay Stock Exchange sensitive index or Sensex closed Friday at 3,141.61, netting a gain of 107.70 points or 3.55 percent over its previous week's close.

The rally on the bourse was triggered by improved buying sentiment in heavyweight technology counters on hopes of sharply higher inflows from the foreign institutional investors in the domestic market in the months ahead.

Hopes of higher inflows from foreign funds have risen after global equity index compiler Morgan Stanley Capital International raised India's weightage in its emerging markets index to 4.25 percent from 4.21 percent last week.

Global portfolio managers closely track the index to firm up decisions on allocating money to different countries.

Foreign funds, the backbone of India's liquidity starved equity market, have pumped $83.4 million this month, the highest monthly inflows since March.

The foreign institutional investor activity has also increased in the domestic market after global rating agency Moody's Investors Service said last week that it had placed the credit ratings of India on review for a possible upgrade.

"The market is really looking towards foreign fund investors for a strong medium-term rally in the days ahead. Increased foreign fund activity on the bourse will provide the momentum for a bull run," said a stock market analyst.

In the holiday truncated intra-week trading session, the market opened higher on buying in both new as well as old economy counters. It kept surging higher for the remaining part of the weekly trading session on heavy buying in tech counters.

Indian stock exchanges and financial institutions were closed Tuesday to mark the 533rd birth anniversary of Guru Nanak, the founder of the Sikh faith.

The market mood was also buoyed by a sharp rally on U.S. markets on improved corporate outlook and hopes of economic recovery.

U.S. stocks racked up gains for the third straight session Friday after computer giant Hewlett-Packard surprised Wall Street with a strong revenue forecast.

The technology-laced Nasdaq closed up 1.19 points, or 0.08 percent, at 1,468.74, according to the latest figures. That's its highest close since June 19.

Shares of banks and financial institutions also boosted the market sentiment in the Indian market last week after Parliament approved a law that should help lenders pare their more than 1 trillion of bad loans.

The law, which must be approved by the upper house of Parliament, allows domestic banks seize and sell the secured assets of willful defaulters of loans.

Indian commercial banks and the state-owned institutions that fund industries had as much as a combined 1.1 trillion of bad loans as of March 2001.

Shares of state-run companies, however, came under selling pressure on reports that the disinvestment ministry had dropped two public sector oil giants from a list of around 16 privatisation transactions it hopes to complete this year.

The privatisation process of the oil firms - Hindustan Petroleum Corporation Ltd. (HPCL) and Bharat Petroleum Corporation Ltd. (BPCL) - was put off for three months in September on political squabbling within the ruling coalition.

In the tech sector, Infosys Technologies, India's largest listed software exporter, rose 6.65 percent over its previous week's close to 4,619 following sharp gains in its American depository shares, Infy, listed on Nasdaq exchange.

Wipro, the country's most valuable software company by market capitalisation, fell 1.5 percent to Rs 1,574.85 on profit booking after gaining over 15 percent in the intra-week trade.
Source: IANS
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