Markets Outlook: Traditional yearend rally seen pushing up Indian shares

Monday, 23 December 2002, 08:00 Hrs
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MUMBAI: India's key share market index is likely to move upward in the week ahead on the back of a traditional yearend institutional buying that occurs just before Christmas and continues into the new year.

Analysts, however, say that the stock trading volume in the coming sessions may see a sharp plunge as most of the bulk institutional investors, especially foreign fund managers, go on annual yearend vacations.

"A short but cheering rally in stocks of heavyweight companies is on the cards as the year 2002 draws to a close. I don't see any reason why the traditional yearend rally shouldn't take place this year," said a fund manager with a brokerage firm.

"Usually, the fund managers and retail investors pick up blue-chip shares a couple of days before the end of the year on hopes that the new year would see large-scale fresh inflows of fund in the market," the fund manager added.

The market barometer 30-share Bombay Stock Exchange sensitive index or Sensex closed Friday at 3,337.22, a moderate fall of 5.75 points or 0.17 percent from its previous week's close.

The market closed in the negative zone on the week for the first time in eight consecutive weeks.

In spite of hopes of a short rally in the week ahead, dealers say the total volume of shares traded on the bourses is likely to witness a sharp drop following very less participation of institutional investors, especially the foreign funds.

"The majority of the foreign fund investors have started packing their bags for the yearend vacations to celebrate Christmas and New Year. This will result in anaemic trading volume in the days ahead," said a broker with the Bombay stock exchange.

"Trading volume is usually thin in the last week of December, and it could be even lighter this year due to the timing of the holidays," the broker added. This year, Christmas and New Year fall in the middle of the week on Wednesday.

Traders say selective technology shares may witness fresh buyers interest on hopes that some of the leading software makers would post better-than-expected financial result for the quarter ended December.

Blue-chip technology firms such as Infosys Technologies and Wipro will start unveiling their financial numbers for the October-December quarter from the first week of January.

The market would also closely track the developments in the Middle East and fears of a potential war with Iraq could dampen the investor sentiment.

In some of the toughest U.S. language to date on Iraq, U.S. Secretary of State Colin Powell on Thursday said Iraq is in "material breach" of a United Nations disarmament resolution.

A war in the Middles East could take the global crude oil prices to very high levels, putting pressure on the Indian economy that imports 70 percent of its oil requirements.

In the intra-week trade ended Friday, the market opened the week sharply lower as investors booked profit in technology stocks after an initial euphoric buying in counters of state-run firm.

The buying in public sector stocks was fuelled by hopes the government's faltering economic reforms drive would get a boost following the ruling Bhartiya Janata Party's (BJP) big win in the Gujarat assembly poll.

A section of analysts believe the victory will give fresh momentum to the gasping reform programme by strengthening the BJP's hand at the head of the squabbling coalition in power at the centre.

But others argue that the poll verdict will see fresh roadblocks going up against reforms, which are already facing fierce resistance.

The market kept moving within a close range for the better part of the trading week in the absence of major fund activity on the bourses.

The market operators ignored the findings of a parliamentary committee that was set up in April last year to look into a market scam that badly shook the Indian financial system and eroded billions of investor wealth.

The panel has blamed stockbroker Ketan Parekh and the finance ministry, among a host of others, for the scam.

In the old economy sector, Ranbaxy Laboratories, India's largest drug maker by sales, gained nearly three percent over its previous week's close to touch 566.45.

The company shares rose on reports that it had received $7 million from Bayer AG of Germany for its once-a-day ciprofloxacin last week.

Shares in Dr. Reddy's Laboratories, one of India's leading pharmaceutical companies, rose 11.5 percent to 893 after a U.S. court ruling paved the way to market its modified version of Pfizer's Norvasc.

Hyderabad-based Dr. Reddy's Laboratories expects to launch the blockbuster hypertension drug in U.S. next August after final regulatory approvals.

In the technology sector, Infosys Technologies, India's largest listed software exporter, lost nearly one percent from its previous week's mark to touch 4,616.45 following a drop in its American shares listed on the Nasdaq.
Source: IANS
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