Uptrend may continue

The latest rally on the domestic bourses has been a part of the firm trend seen across global markets. Dow Jones hit a record high on 12 October 2006. The key benchmark index in Singapore hit a record high on 13 October, and Hong Kong’s Hang Seng hit a six-year peak, the same day.

The fresh rally on the domestic bourses has materialized just at the onset of the earnings season. Market men expect strong Q2 results from corporate India. Earnings have been a key driver of the bull-run that began on the bourses in 2003.

In the near term, funds and high networth individuals are likely to churn their portfolios depending on Q2 results, and outlook from company managements.

Major results scheduled next week are TCS, HCL Tech, HDFC Bank, Bajaj Auto, Grasim, Hindalco, Wipro, ACC, HDFC, L&T, Reliance Industries, Ranbaxy, ONGC, Reliance Energy, and Satyam Computer.

In recent months, lower oil price has eased inflation and interest rate worries. This has also bolstered the bourses. Crude price at current $58.25, is sharply down from a record high of $78 a barrel of mid-July 2006.

A section of the market attributes the strong performance of the Indian bourses since late-July 2006, to long-term growth drivers such as a favourable demography (large share of young population), robust domestic consumption and acceleration in infrastructure creation. Prime Minister Mahmohan Singh has promised a complete policy on infrastructure, including regulatory and institutional framework, to make it attractive for private participation in the near future.

FII inflows for October 2006, till 11 October 2006, totaled Rs 1,628.60 crore. Mutual funds sold shares worth a net Rs 34.11 crore in October 2006, till 12 October 2006.

Meanwhile, a large mop up from IPOs is expected in the next few months. Cairn India said on 12 October 2006, it will raise $2 billion through an IPO sometime in December. Another mega IPO in the pipeline is that of real estate conglomerate DLF.