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Beyond 5,000 Again

In a broad-based rally, Indian stock markets broke the two-week long slumber to cross the psychological 5,000-point mark once again. The ceasefire across the LOC restored faith in Indian markets as FIIs returned.

It was a cheerful week for Indian equity investors. After two straight weeks of losses, the BSE Sensex climbed over 200 points this week to close above the psychological 5,000-point mark. Overall, the BSE Sensex gained 4.26 per cent and the S&P CNX Nifty was up 4.84 per cent. The recent rally was not only confined to large cap stocks. The S&P CNX Midcap 200 Index rose 5.72 per cent and the broader S&P CNX 500 Index gained 5.1 per cent.

The ceasefire along the LOC across Kashmir by both Pakistan and Indian governments has helped in improving market sentiment. And eyeing this prospect of stability in the region, FIIs returned to the market. This week, FIIs made net purchases of Rs 573.7 crore against Rs 31 crore in the previous week. Domestic mutual funds continued their buying spree and invested Rs 363.5 crore in the week. Many mutual funds had sold shares when the Sensex crossed the 5,000-mark during the initial half of November. But, with subsequent fall in the Sensex, they have made fresh purchases.

The market rose on each trading sessions except for Monday. Low FII inflows and the lack of any triggers led the Sensex to close down 16 points on Monday. But, with the easing of Indo-Pak tensions in Kashmir, Indian stock markets showed a positive trend in the remaining trading sessions. Auto and cement stocks attracted some good buying interest following the expectation of better sales this month. While Bajaj Auto gained 6 per cent, Tata Motors was up 5.5 per cent. Among cement stocks, L&T was up 9.84 per cent – the highest gainer among Sensex stocks and ACC gained 2.6 per cent. Metal stocks were also in demand as aluminium and copper prices rose sharply in the international markets. Hindalco gained 5.53 per cent and TISCO moved up 4.86 per cent.

Among sectoral indices, the BSE IT Index gained the most. After gaining 2.6 per cent in the previous week, the BSE IT Index gained another 6.6 per cent this week. However, mid-cap tech stocks gained more than the large-cap counterparts. Tech stocks have become attractive following the recovery in the US economy. As per latest estimates, the US economy has grown by 7.2 per cent in the third quarter of 2003 – the highest growth in the last 19 years. The improved sentiment for tech spending in the US is another positive factor driving the prices of tech stocks in India.

Among other sectoral indices, except for the BSE FMCG Index, all other indices made substantial gains. The BSE Healthcare Index gained 4.53 per cent, the BSE Bankex rose 4.77 per cent and the BSE PSU Index was up 4.93 per cent.

In less than a month, the Sensex has crossed the psychological 5,000-point mark on three occasions but has failed to maintain the momentum. In the process, the market breadth has also improved. As always, the future course of market movement will largely depend on the FII inflows.