Indices surge to new lifetime highs on all-round buying

15 September 2005

Yesterday's marginal fall was a mere pause in the upward march of frontline indices. Markets continue to defy gravity as both Sensex and Nifty added well over a per cent each in today's trade.

The move by SEBI to allow domestic mutual funds to increase their exposure to the derivatives segment fuelled the markets. SEBI has finally decided to treat domestic mutual funds at par with FII's as far as trading in derivatives goes. After this move, domestic mutual funds are expected to increase their exposure thereby bringing in more liquidity to the derivatives segment.

The indices opened firm and traded within a band with alternate bouts of buying and selling till late in the afternoon. All-round buying in the last one hour led to a surge in the indices and they scaled new lifetime highs. Both the Sensex and Nifty closed the day at new lifetime closing highs.

Sensex closed at 8284, a gain of 95 points, and the Nifty at 2524, a gain of 32 points. Nifty September futures closed at a discount of 6 points to the spot index.

Technology stocks had a good day today led by TCS, which closed well over 3 per cent higher. The stock attracted a lot of buying on market speculation about its aggressive hiring programme for the current year. HCL Tech added 3 per cent. Satyam closed a per cent higher, while Wipro and Infosys also closed with gains.

Strong gains in Reliance Industries and HLL added to the rally in major indices. Both stocks added well over 2 per cent each.
Tata Chemicals, Grasim and VSNL were the biggest gainers on the Nifty while Bajaj Auto, ABB and Tata Motors were the major losers.

The US indices gave up further ground yesterday, hurt by the bleak outlook for retail sales. Many major retail companies are struggling for sales growth as the first signs of a slowdown in consumer spending have started emerging. The bounce back in crude prices also affected the sentiment yesterday.

While the Dow closed half a per cent lower yesterday, the S&P 500 lost more than a quarter of a per cent. A sell off in Google and Yahoo weighed in on the NASDAQ, which lost more than a per cent.

Indian ADR's performed better than the overall markets yesterday as most of them held ground. Tata Motors was the biggest gainer, adding more than 2 per cent. ICICI Bank and HDFC Bank managed to close with gains of well over half a per cent each. Dr. Reddy's also closed with marginal gains.

Among the technology stocks, Wipro and Satyam closed lower while Infosys managed to close with gains. Among the telecom stocks, MTNL continued its downtrend losing another 2 per cent while VSNL added well over a per cent.

NYMEX crude futures for October delivery bounced back close to $2 per barrel yesterday after the weekly US inventory data showed a larger than expected fall in fuel stocks. Crude added 3 per cent from the previous day's close to end at $65.09 to a barrel yesterday. The commodity is trading with gains of close to half a per cent in early European trades today.

The government is planning to completely exit Maruti Udyog in the near future. The government had decided to offload an 8 per cent stake in Maruti to domestic financial institutions. According to media reports, the heavy industries ministry is favourable to a proposal to offload another 10 per cent stake in the company. The stock has been on an upswing for the past few days and added 3 per cent today as well.

VSNL would invest $40 million in a new undersea telecom cable connecting Europe and Asia. The company would also build a landing station for the cable near Mumbai. The new cable line, fourth in the SEA-ME-WE network, is expected to be operational by the end of this year. The stock added close to 4 per cent.

Bharti Televentures is also a partner in the SEA-ME-WE-4 consortium and would also invest $40 million in the project. Bharti's landing station would come up on the eastern coast, near Chennai. The stock added more than one and a half per cent.

Sun Pharma has acquired the US operations of Valeant Pharma for an undisclosed amount. The acquisition would add to the company's capabilities in creams and ointments. The acquired unit has a manufacturing facility in the US. Sun had acquired the Hungarian operations of Valeant earlier this year. Sun also holds close to 70 per cent stake in US based Caraco Pharma. The stock closed marginally lower.

The board of directors of Bank of Baroda has approved an issue of unsecured bonds to raise Rs1,000 crore. The bank would keep an option to retain an additional Rs500 crore. The funds would augment the Tier II capital of the bank. The stock added a per cent.

According to media reports, Tata Tea is close to acquiring a herbal tea and beverages brand in the US for $100 million. Meanwhile, the company's shareholders have already approved raising of FII investment limit to 35 per cent. The stock added more than a per cent.

Newspaper reports of a further rise in cement prices led to gains in frontline cement stocks. While Gujarat Ambuja added well over 3 per cent, ACC closed more than a per cent higher.

Mid-Cap Action

Mid-caps also recovered from yesterday's lows as buying frenzy returned to most active mid-cap stocks. However, gains on the mid-cap index were lower than that on the Nifty. The CNX Mid-Cap index closed the day at a new lifetime high of 3853, a gain of 42 points.

The board of directors of GE Shipping would meet tomorrow to decide on the final de-merger ratio for its offshore services business. The offshore services unit currently offers drilling services, marine construction and terminal handling services. The unit would have a turnover in excess of Rs500 crore during the current year.

According to market speculation, GE shareholders are expected to receive between 20 and 30 shares of the new offshore services company for every 100 shares held by them in GE Shipping. There would be a reduction in the share capital of GE Shipping and shareholders would be issued between 70 and 80 shares of the new company after re-structuring for every 100 shares currently held by them.

India Infoline was one of the significant gainers among mid-caps, closing the day locked in 20 per cent upper circuit. The stock had corrected yesterday after gaining over 15 per cent on Tuesday.