Fund buying, short covering in derivatives boost bourses

Continued institutional buying, firm global markets and short covering in derivatives took the S&P CNX Nifty to all time high and BSE Sensex to its highest level in nearly 4 months, last week. The market has been on an uptrend since early April 2007.

The 30-share BSE Sensex rose 232.30 points or 1.62% to 14,570.75 in the week ended Friday, 1 June 2007. This was its highest closing in nearly four months since 9 February 2007. The S&P CNX Nifty gained 48.90 points or 1.15% 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% to settle at 7,473.87. BSE Mid-Cap index rose 121.14 points or 1.97% to 6,264.28.

Positive cues from US and Asian markets took Sensex up 59 points on Monday 28 May 2007. The S&P CNX Nifty struck all time high.

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, 29 May 2007, led by gain in index heavyweight Reliance Industries (RIL). The rally was partly due to short covering ahead of expiry of May 2007 derivatives contracts on Thursday, 31 May 2007. Nifty struck a fresh record high.

Weakness in global markets pulled Sensex down 97 points on Wednesday, 30 May 2007. Chinese stocks tumbled 6.50% on that day 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% from 0.1% in what was seen as the strongest attempt yet to curb speculation in a market that had risen more than 60% so far this year.

A rebound in Asian markets, strong January-March 2007 quarter GDP growth data and short-covering in derivatives ahead of expiry of May 2007 derivatives contracts lifted Sensex 133 points on Thursday, 31 May 2007. Asian shares rebounded after a record close on Wall Street on Wednesday helped soothe worries about a slump in Chinese mainland stocks.

The market posted small gains in volatile trading on Friday, 1 June 2007. Sensex rose 26 points.

FIIs made heavy purchases in the month of May 2007. FII inflow for May 2007, till 30 May 2007, aggregated Rs 3959.70 crore. Mutual funds, too, were in buying mode. Their inflow in May 2007, till 30 May 2007, totaled Rs 1783 crore.

Engineering & construction major L&T surged in two trading sessions on Tuesday and Wednesday, after it reported robust Q4 results during trading hours on Tuesday. It reported 50% rise in net profit to Rs 701 crore in Q4 March 2007 from Rs 467 crore in Q4 March 2006. Sales rose 35.01% to Rs 6248.24 crore in the Q4 March 2007 as against Rs 4627.87 crore in Q4 March 2006. The company has strong order book of over Rs 35,000 crore.

Bhel continued its uptrend that began early this month ahead of record date for bonus issue. The company had set 1 June 2007 as record date for a 1:1 bonus issue. The stock turned ex-bonus from Thursday, 31 May 2007.

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. RBI had, on 16 May 2007, 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.

Tata Tea gained in volatile trade after selling its stake in US-based Glaceau to Coca-Cola. It announced after market hours on Friday, 25 May 2007, that it would receive about $1.2 billion for selling its 30% stake in vitamin water maker Glaceau to Coca-Cola. This is nearly twice what it paid for it.

India Infoline spurted after four top officials from a rival brokerage joined the firm. The market believes that inducting top officials from rival brokerage would help the firm significantly expand its client base.

On Monday, 28 May 2007, Binani Cement settled at Rs 68.65 on BSE, a discount of 8.40% over IPO price of Rs 75 per share. The Binani Cement IPO was subscribed 1.36 times.

On Wednesday, 30 May 2007, Insecticides India settled at Rs 109.50, a discount of almost 5% over IPO price of Rs 115. The company had priced its IPO at the top end of the Rs 97 to Rs 115 price band.

On the same day, MIC Electronics settled at Rs 335.65 on BSE, a premium of nearly 124% over IPO price of Rs 150 per share. The company had priced its IPO at the top end of Rs 129 to Rs 150 price band, following overwhelming investor response to the IPO.

McDowell Holdings jumped 20% to 195.60, compared to base price of Rs 163, on its listing on BSE on 30 May 2007. The listing McDowell Holdings (MHL) on the bourses follows a restructuring scheme undertaken at United Spirits (USL) whereby investment business of USL was transferred to MHL as a going concern. The listing McDowell Holdings (MHL) on the bourses took place following a restructuring scheme undertaken at United Spirits (USL) whereby investment business of USL was transferred to MHL as a going concern.

BSE shifted a total of 25 scrips to trade-to-trade segment from 1 June 2007. 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 28 May 2007, 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 GDP grew 9.4% in FY 2007 as against 9.2% in the previous fiscal as robust growth in manufacturing and services sector more than made up for a slowdown in agriculture and construction sector.

However, GDP growth slowed down to 9.1% in Q4 FY 2007 (Jan-March) as against 10% in the same quarter of the previous fiscal, pulled down by slow agriculture, construction, financial and social services growth.

Manufacturing grew 12.3% in FY 2007 as against 9.1% in the previous year, while trade, hotels, transport and communication grew 13% as against 10.4%. Agriculture and allied sector's growth, however, slowed down to 2.7% as against 6% in the previous fiscal and construction to 10.7% as against 14.2%.

The Communist Party of India (Marxist), which supports the ruling coalition, urged the government on Wednesday, 30 May 2007, 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".

Indian Meteorological Department declared onset of southwest monsoon over Kerala Tuesday, 28 May 2007. The annual monsoon rains have hit the country's southern coast four days ahead of the normal date of 1 June 2007. An early monsoon would help several crops - cotton, soybean, groundnut and rice -- if rains were 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.