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Govt, FIIs Assist Rally

FIIs invested nearly Rs 2,840 crore, while the government signalled that it was considering to divest its share in some PSUs. This triggered a rally in the week ended December 16, 2005

Equity markets ended yet another eventful week on Friday. Robust FII inflows and government's progress on disinvestment front trigged a rally, as the BSE Sensex crossed 9,300 mark in the week ended December 16, 2005. On Friday, the index closed at 9,284.46 mark, up 2.40 per cent. The Nifty too surged 1.95 per cent to end the week at 2,810.15 levels. Among the broader indices, the S&P CNX 500 gained 1.68 per cent, while the CNX Midcap added 0.98 per cent over the week.

Indian stock markets hit a record high on Monday. Government announcement that it had identified 10 to 15 profit-making state firms in which it could decide to divest its shares to raise Rs 4,000 to 5,000 crore triggered a rally in the PSU stocks. Consequently, the 30-stock BSE Sensex rose nearly 66 points to end the day at 9,133.67 levels. The Nifty too had similar gains with the index rising 0.72 to per cent to close at 2,776.20 mark. Mid-cap stocks, though, had a flat day with the CNX Midcap index closing 0.06 per cent up on Monday. The pack of gainers on the Sensex was led by ONGC, Tata Motors and L&T.

Equity markets had another ballistic day on Tuesday. Helped by robust buying from foreign institutional investors, the 30-scrip BSE Sensex closed at an all-time high of 9,263.90, up 130.23 points. Earlier in the day, the Sensex had dipped sharply soon after the start of the trading. However, it gathered momentum immediately and remained positive since then. Through the day, the index moved in the range of 9,111.12 - 9,274.19 points. The Nifty too had a good day, as it closed up 1.30 per cent at 2812.30 levels. Mid-caps, though not as active as large-caps, generated decent interest with the CNX Midcap rising 1.04 per cent.

Bouts of volatility marked the day in the equity markets on Wednesday. Markets opened on a positive note but failed to build on the initial gains. The Sensex crossed 9,300 levels in the morning session but fell sharply to a low of 9,200.47 levels. At the end of the day, the index closed at 9,241.76 levels, down 22.14 points. The Nifty closed at 2,804 levels, down 0.28 per cent. Most mid- and small-caps, though, ended the day flat, with the CNX Midcap index closing down 0.01 per cent up on Wednesday. Banking stocks were in the limelight.

Equity markets ended in red for the second consecutive day on Thursday. After starting off on a positive note, the Sensex slipped mid-way during the trading session to end at 9,117, down 125 points. In the broader markets, the Nifty too shed close to 1 per cent to end at 2,778 points. Widespread profit-booking was witnessed as the mid-caps barometer CNX Mid-cap index also lost 0.6 per cent.

Barring losses during the early hours of trading, equity markets rallied during most part of the day to end the week on a positive note on Friday. The 30-stock BSE Sensex opened higher but dipped sharply to an intra-day low of 9,139.48 levels. Bouts of volatility followed. However, the index gathered momentum soon and rallied in the second half to an intra-day high of 9,290.31 points. At the end of the day, the index closed up 114 points at 9,284.46 mark. The Nifty too closed at 2810, up 32 points. Metal, auto, pharma, cement, sugar and consumer durable stocks saw hectic buying.

Among the 30-Sensex stocks, 21 closed higher in the week ended December 16, 2005. The pack of gainers was led by over 10 per cent rise in Hindalco Industries (up 11.05 per cent) and HDFC (up 10.87 per cent). Reliance Energy (down 3.53 per cent) lost the most over the week.

Among the sectoral indices, BSE Metal index ended the week firm with gains of 5.88 per cent. BSE Banking (up 4.58 per cent), BSE IT (3.59 per cent), BSE PSU (2.42 per cent), and BSE FMCG (up 1.09 per cent) followed.

The combined daily average turnover on both exchanges rose by 26.87 per cent to Rs 11,616 crore in the week ended December 16, 2005. The week's rally was supported by nearly Rs 2,840 crore investment by FIIs. Mutual funds, though, continued their selling spree and booked profits worth Rs 704 crore.

Outlook

Volatility is unlikely to take a break in the coming weeks. One of the prime reasons for the recent spurt in the stock market has been heavy investment by the foreign institutional investors. However, with the Christmas round the corner, we might see a slowdown in the inflows, which in turn could affect the prevailing rally. However, nothing radical is expected. Good news from the government on disinvestment might trigger further rally in the PSU stocks.