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FIIs Push Sensex Above 6,600 Points

Equity markets got a multidirectional push this week. FIIs pumped in investments worth over Rs 4,210 crore. Many other positive news helped Sensex close above 6,600 mark

Equity markets got a multidirectional push this week. After a gap of three weeks, foreign institutional investors showed keen interest in India and pumped in investments worth over Rs 4,210 crore. The government announced raising the FDI limit in the telecom sector from the existing 49 to 74 per cent and also cleared the National Electricity Policy. Global rating agency Standard & Poor's raised India's long term foreign currency rating to BB+ and affirmed long term local currency rating at BB+. Last week's decision of the government allowing non-government provident funds to participate in the equity markets also boosted sentiment.

Markets reacted to these developments sharply--the 30-stock BSE Sensex surged 3.10 per cent to cross the psychologically important barrier of 6,600 points and signed off the week at 6,618 points. Nifty too zoomed 3.47 per cent to end the week at 2,078 points.

Among the broader indices, the S&P CNX 500 gained 3.78 per cent, while the prevailing mid-cap rally gained further momentum with the CNX Midcap adding 5.20 per cent over the week.

Even as investors were bullish, caution was in the air throughout the week. Every now and then, the markets paused for a breather to analyse the trend. For example, it surged on Monday and underwent minor corrections in the next two days. It treated the government announcement on telecom and power sector reforms and S&P's ratings with caution and did not react immediately. In fact, the Sensex shed 22 points the day the government announced the reforms. However later, it acknowledged the step and surged nearly 90 points on Thursday.

Power sector stocks were on fire. Both Reliance Energy and NTPC surged over 11 per cent, while BHEL added 9.59 per cent. Tata Power also gained 4.82 per cent.

Among the sectoral indices, BSE PSU Index ended the week up a whopping 5.23 per cent. Banking stocks too fared well. The BSE Bankex zoomed 4.18 per cent. Banking major State Bank of India rallied after it said on Thursday that it would buy a 51 per cent stake in Mauritius-based Indian Ocean International Bank. The stock added 4.07 per cent over the week. ICICI Bank and HDFC Bank also rose over 4 per cent.

Metal stocks too gained handsomely on account of firm metal prices in international markets. The BSE Metal Index surged 5.87 per cent. SAIL and TISCO added over 6 and 4 per cent, respectively, while Ispat Industries gained nearly 8 per cent.

Gujarat Ambuja Cements Ltd (GACL) joined hands with Swiss giant Holcim, the world's second-largest cement maker, to bid for India's second-largest cement maker, ACC.

IT stocks continued to gain this week as well with the BSE IT index closing up 2.09 per cent. Software companies including Infosys, TCS, Wipro and Satyam ended the week in the positive territory.

After a smart recovery last week, pharma stocks ended the week marginally up--the BSE Healthcare Index rose 0.20 per cent. FMCG stock continued their good show with the BSE FMCG Index gaining 1.51 per cent over the week.

The combined daily average turnover on both exchanges rose a whopping 22.58 per cent to Rs 8,785 crore in the week ended February 4, 2005.

Foreign institutional investors turned net buyers and pumped in Rs 4210.80 crore, while domestic mutual funds sold stocks worth Rs 134 crore over the week.

Outlook
The equity markets' scene looks rosy. FIIs are in a bullish mode, inflation is down to a 34-week low level, global rating agency S&P is positive on India, and the government too is indicating that reforms would continue in days to come. We feel markets should react positively to these developments. However, much would depend on the mood of FIIs.