Markets Outlook: Bull run to continue on fund inflows

Monday, 23 June 2003, 07:00 Hrs
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MUMBAI: After logging fourth straight week of gains, the rally in India's blue-chip equities may show little signs of losing steam in the week ahead with foreign fund inflows in the domestic bourses expected to continue unabated.

Market traders and analysts say though the benchmark stock market index, which ended the week by touching a 14-week high Friday, may witness moderate technical correction after recent sharp gains, the overall trend would remain positive.

"The market rose sharply higher last week defying expectations of a correction in share prices after previous weeks' rally. Now I think shares are ripe for a consolidation phase," said a broker with the Bombay Stock Exchange.

"But even if the technical correction sets in the coming sessions, the downside would not be very significant. Some investors are waiting for the market to correct itself to resume buying at lower levels," the broker told IANS.

"Overall, I think the bull-run on the bourses will continue and main trigger for this will undoubtedly be provided by foreign institutional investors who have become very aggressive buyers on the bourses."

India's most widely tracked 30-share Bombay Stock Exchange sensitive index or Sensex closed the week on Friday at 3,499.50, representing a gain of 145.36 points or 4.33 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.

Foreign funds, which as the backbone for India's liquidity starved capital market, have bought shares worth $360 million in the current month so far, compared to a total investment of $254.8 million for the month of May.

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 days 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.

The issue has been subscribed nearly 10 times, making it the second largest IPO collection in the Indian market. Bids were received for over 692.10 million shares, as against the issue size of 72.2 million shares.

Suzuki Motor took management control of Maruti from the Indian government in May 2002, as part of the latter's privatisation programme. The Japanese auto major holds a majority 54.2 percent stake.

"The listing of Maruti shares on the domestic bourses will trigger a renewed interest among retail investors for good quality equities," said a fund manager with a foreign brokerage firm.

In the intra-week trade ended Friday, the market opened the week on a negative note with investors rushing to take profit in shares of heavyweight old economy firms that had staged smart rally.

The market index, however, managed to stage recovery soon on fresh fund inflows and close higher for better part of the intra-week trading sessions.

While old economy shares staged rally on company specific news and normal monsoon hopes, technology shares also surged higher tracking a sustained recovery in the U.S. markets.

In the old economy sector, Shares of Reliance Industries, India's largest refiner and petrochemicals maker, ended 7.7 percent higher over the week at 336.40 after the company said it had struck oil in an onshore block in Yemen.

Cement maker Grasim Industries gained 16.6 percent to touch 455.05 after it announced Tuesday the acquisition of the cement division of business rival Larsen and Toubro.

The deal, which was pegged at 22 billion making it one of the country's largest merger and acquisition transactions, would make Grasim as the country's largest cement producer.
Source: IANS
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