Strong growth rate, taming inflation boost bourses

Mumbai, Jun 2: Impressive growth rates and taming inflation prompted continued institutional buying and short covering in derivatives, taking the National Stock Exchange (NSE) S&P CNX Nifty to an all time high and the Bombay Stock Exchange (BSE) Sensex to its highest level in nearly 4 months last week.

The 30-share BSE Sensex rose 232.30 points or 1.62 per cent to 14,570.75 in the week ended June 1. This was its highest closing in nearly four months since February 9 this year. The S&P CNX Nifty gained 48.90 points or 1.15 per cent to 4297.05, a lifetime closing high.

Small-cap and mid-cap stocks which have been rising for a while now extended gains. The BSE Small-Cap index jumped 207.95 points or 2.86 per cent to settle at 7,473.87. BSE Mid-Cap index rose 121.14 points or 1.97 per cent to 6,264.28.

On Monday, positive cues from US and Asian markets took Sensex up by 59 points, while the S&P CNX Nifty struck an all time high then.

The benchmark index, BSE Sensex, which stayed lacklustre for most part of the day, surged 110 points to cross the 14,500 level on Tuesday, led by gains in index heavyweight Reliance Industries (RIL). The rally was also partly due to short covering ahead of expiry of May 2007 derivatives contracts on Thursday, while the Nifty struck a fresh record high.

Weakness in global markets pulled the barometer Sensex down by 97 points on Wednesday, as Chinese stocks tumbled 6.50 per cent after the government tripled a share-trading tax to cool its red-hot market, buffeting Asian and European markets. Nevertheless, the sharp fall in Chinese markets failed to trigger a broad rout in global markets which some had feared.

China's Ministry of Finance raised stamp duty on share transactions to 0.3 per cent from 0.1 per cent in what was seen as the strongest attempt yet to curb speculation in a market that had risen more than 60 per cent so far this year.

A rebound in Asian markets, strong January-March 2007 quarter gross domestic product (GDP) growth data and short-covering in derivatives ahead of expiry of May 2007 derivatives contracts lifted the Sensex 133 points on Thursday.

The market posted small gains in volatile trading on Friday, when the Sensex rose by 26 points.

Traders disclosed that Foreign Institutional Investors (FIIs) made heavy purchases last month. FII inflow for May, this year aggregated to Rs 3,959.70 crore. Mutual funds, too, were in buying mode, wherein their inflow totaled Rs 1,783 crore, they added. Engineering and construction major L&T surged in two trading sessions on Tuesday and Wednesday, after it reported robust Q4 results, while Bhel continued its uptrend that began early this month ahead of record date for bonus issue.

Information Technology (IT) shares which have underperformed in the market latest rally, found support at lower level. Over the past few weeks, IT shares have been hit by stronger rupee. A rise in the rupee directly impacts revenue and profit of IT firms, which derive a lion's share of revenue from exports to the US.

Bank pivotals found buying support at lower level. The Reserve Bank of India (RBI) had earlier last month, released the long-awaited draft guidelines for banks and dealers to begin trading credit default swaps in the country, derivatives that allow banks to hedge against the risk of default. The move will enable banks in India to step up lending to the corporate sector by allowing them to offload some of the risk to third-party investors, market analysts explained.

BSE shifted a total of 25 scrips to trade-to-trade segment from June 1. The scrips transferred to trade-to-trade segment include Raj Television Network, Autolite (India), KIC Metaliks, S Kumars.com and Mukat Pipes, among others.

On Monday, capital market regulator, the Securities and Exchange Board of India (SEBI), barred promoters of the Adani group from accessing the equity markets and dealing in securities for two years. The market regulator has found that the promoters aided and abetted Ketan Parekh (KP) entities in manipulating the share price of Adani Exports, now known as Adani Enterprises.

The gross domestic product (GDP) grew 9.4 per cent this year as against 9.2 per cent in the previous fiscal as robust growth in manufacturing and services sector more than made up for a slowdown in agriculture and construction sectors.

However, GDP growth slowed down to 9.1 per cent this year as against 10 per cent during the same quarter of the previous fiscal, pulled down by slow agriculture, construction, financial and social services growth.

Manufacturing grew 12.3 per cent as against 9.1 per cent last year, while trade, hotels, transport and communication grew 13 per cent as against 10.4 per cent. Agriculture and allied sector's growth, however, slowed down to 2.7 per cent as against 6 per cent in the previous fiscal.

The Communist Party of India (Marxist), which supports the ruling coalition, urged the government on Wednesday to establish a licensing system for organised retail business and prevent the entry of foreign players like Wal-Mart. It also reiterated that the government should abandon moves to permit foreign investment in the retail sector through what it said was the ''backdoor''.

The Indian Meterological Department declared onset of Southwest Monsoon over Kerala on Tuesday. The annual monsoon rains have hit the country's southern coast four days ahead of the normal date of June 1. An early monsoon would help several crops - cotton, soybean, groundnut and rice, if rains are evenly spread over the next two months. The distribution of rains is crucial for agricultural yield.

Good rains also spur rural spending on a wide range of industrial products, from soaps to motorcycles, analysts explained.

UNI