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Investors Ignore Monsoon Worries

Renewed institutional buying and rally in the bluechip scrips help Sensex breach the psychologically important 6,700 mark to sign off the week at 6,749 points. Nifty gains 0.86 per cent

Equity markets completely ignored the concern over the monsoon and closed higher in the week ended June 3, 2005. Renewed institutional buying and rally in the bluechip scrips helped the 30-stock BSE Sensex breach the psychologically important 6,700 mark to sign off the week up 0.61 per cent at 6,749 points. Nifty too gained 0.86 per cent to close just below the 2100 level at 2,094 mark.

However, it was not a smooth ride this week. Markets had a poor start on Monday when both the Sensex and Nifty slipped in red. Bears came back to haunt the equity investors on Thursday when both the indices lost 1.10 per cent. However, the last day rally of over 1.40 per cent helped the markets end the week with a bang.

Among the Sensex constituents, though, losers outnumbered the gainers--while 17 stocks lost over the week, only 13 managed positive returns. Hindalco Industries, India's largest aluminium maker, lead the losers pack with 6.81 per cent decline. Hindustan Lever Ltd (6.26 per cent), Reliance Energy Ltd (6.52 per cent), and Zee Telefilms Ltd (7.09 per cent) were the top three Sensex gainers of the week.

The broader indices, S&P CNX 500 gained 1 per cent, while CNX Midcap 200 added 0.49 per cent.

Among the sectoral indices, BSE FMCG gained 2.88 per cent. This is a bit surprising in view of the concerns over the monsoon. On Thursday, the Centre for Mathematical Modelling and Computer Simulation predicated that the monsoon would be 34 per cent below normal in June. However, investors completely shrugged off the speculations. All BSE FMCG constituents ended the week in the positive territory.

BSE Healthcare gained a handsome 2.72 per cent. BSE IT (1.04 per cent) and BSE PSU (0.74 per cent) too ended the week in the positive territory. Banking stocks, though, lost--BSE Bankex slipped 0.07 per cent. Metal companies, which cut prices on Wednesday, too lost over the week with the BSE Metal Index closing down 3.77 per cent.

The combined daily average turnover on both exchanges went down 8.73 per cent to Rs 5,954.99 crore.

Foreign institutional investors reversed their selling spree and invested Rs 368 crore in the markets. They had been on a selling spree for the last three weeks. Domestic mutual funds, though, booked profits worth Rs 303 crore.

Outlook

FIIs' renewed interest in the Indian equity markets is a good sign. However, domestic mutual funds who had been driving the markets in absence of FII support, have started to pull out. With the Sensex at its two-and-half-month high, it would be interesting to see how they behave in the coming weeks. Worries over monsoon is another factor that is likely to impact the markets. In an agrarian country like India, normal rains bring cheer to all sectors, especially the FMCG sector. So far, investors have ignored this. However, if the forecast for a deficient monsoon turns real, investors would definitely feel the heat.