Indian stock markets continued to gain for the third consecutive week. The BSE Sensex ended the week up 51 points (1.54 per cent) despite the fact that the markets underwent a correction mid-week. The S&P CNX Nifty moved up 10 points (1.26 per cent) over the week. Steady FII inflows and the arrival of monsoon did the trick. The FIIs pumped in Rs 380 crore over the week. In fact, the total net FII inflows in the current fiscal (Rs 2,593 crore)—till June 13—has already surpassed total FII inflows in 2002 (Rs 2,517 crore).
However, the week belonged to Maruti Udyog—the country's largest automobile manufacturer. The company's IPO received a good response in the primary market. The issue, which opened on June 12, 2003, got oversubscribed three times within two days. Maruti has issued 7.2 crore shares of Rs 5 each in the offer. The entire issue will be through the book-building route. While the floor price was fixed at Rs 115, maximum bids came at Rs 120. Institutional investors actively participated in the IPO as 60 per cent of the issue is reserved for them and only 25 per cent is for retail investors. The IPO will close on June 19.
Coming back to the secondary market, unlike the past few weeks, this week both large-cap and mid-cap indices gained equally—while the BSE Sensex gained 1.54 per cent, the S&P CNX Midcap 200 Index inched up 1.26 per cent. However, average-trading volumes dipped 9 per cent over the week, indicating that market participants were being cautious.
The PSU bank stocks, which so far had a good run, underwent a correction after the finance minister asked SEBI to probe bank stocks. Also, there was panic selling in bank stocks as the government is yet to clarify whether the buyback of banks' equity will be at par or premium. Thus, all PSU banks including SBI, Oriental Bank of Commerce, Punjab National Bank and Union Bank, took a hit.
The arrival of monsoon, however, saw the BSE FMCG Index gain the most—up 2.6 per cent. Lately, FMCG stocks have been moving up on the hopes that a good monsoon would mean a revival in rural demand. In fact, in the past one month, the total market capitalisation of 35 stocks in the FMCG index has increased by almost 13 per cent. While FMCG major Hindustan Lever ended the week up 5.22 per cent, another FMCG stock, Britannia, gained 2.3 per cent. The reason: the biscuits major announced a buyback of 25 lakh shares at Rs 650. This price is 19 per cent higher than its closing market price (Rs 545) as on Friday.
It was a quiet week for most technology stocks, except Digital Globalsoft, which gave a scare to the markets. On June 9, 2003, the share price of Digital Globalsoft dipped a huge 25 per cent in a single day––from Rs 500.10 on June 6 to Rs 372.35 on June 9. Stock markets haven't reacted positively to the company's merger plan with HP Services India Software Operations. The company has a 2.5 per cent weightage in the BSE IT Index, which ended the week down 0.3 per cent.
Power stocks too hogged the show this week. While BSES (to be renamed Reliance Energy) gained almost 20 per cent, BHEL and Tata Power surged 7.72 per cent and 7 per cent, respectively. These stocks have been on the move after the passage of the Electricity Bill. Among auto stocks, Hero Honda and Bajaj Auto moved up ahead of their AGMs, where they are expected to announce a dividend.
Outlook
After a delayed start, the monsoon has finally arrived in the country. This is heartening news for old economy stocks in sectors such as FMCG, fertiliser, steel and cement. A good monsoon will revive rural demand, and have a multiplier effect on the economy as a whole. That apart, increasing FII inflows can be expected to keep the market flush with liquidity, thus propelling the whole market upwards.
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