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Nalini D'Souza and S Muralidhar
MUMBAI, May 6: The uninterrupted bull run for six days driven by foreign institutional investors has propelled the BSE Sensex by 403 points or 12.4 per cent and the markets appeared to have reached a point of no return. With FII funds pouring in incessantly speculators' hopes of a correction has failed to materialise, while domestic institutions have found an exit route at comfortable prices.
Since the dissolution of the Lok Sabha, the FIIs have brought in Rs 538 crore trapping short-sellers who have been forced to retreat, paying backwardation charges through their nose. Key stocks picked up by the FIIs have driven the market capitalisation. Reliance's market cap has shot up from Rs 11,463 crore on April 28 to Rs 13,887 crore. ITC's market cap has surged from Rs 22,613 crore to Rs 27,097 crore and that of SBI from Rs 8,063 crore to Rs 10,333 crore. That FMCG stocks have been left out in the rally is reflected in the fall in market cap of Hindustan Lever from Rs 41,233 crore to Rs 40,636 crore.
Even afterthe announcement of the poll date, the market has not been unnerved and domestic operators' expectation of a correction has not materialised. Some brokers are alarmed at the way the funds are flowing in, hoping against hope that FIIs will cool their heels.
After the 92-point rise in the Sensex on Thursday brokers kept their fingers crossed. ``Markets are at scary levels.
This rally is liquidity driven with lot of FII funds flowing in.
However one has to be cautious at these levels considering the fact that there is no follow up support from the domestic players. The volumes at the bourses has also been stock specific. At the next rise we are bound to witness major sell off by the domestic funds," explained Bharat Dalal of Sanat Dalal Securities. But the FII buying has not been confined to the domestic market. The GDR index too has been moving in tandem, registering a 11 per cent rise.
The focus has shifted to how much more is left in the FII kitty. A section of the market now hopes that Hongkong andSingapore based FIIs would join in the party. They argue that select London and US-based FIIs have already brought in over Rs 1,500 crore during the past five weeks.
``The continuous buying by FIIs seems to be a cause of worry for the local short sellers. Despite the sharp surge in the market indices there has been no change in the net long positions at the exchange. This could lead to frenzied short covering or backwardation at many more counters," said Arun Kejriwal of Woodstock Securities.
At the Calcutta stock exchange ITC and Tisco attracted backwardation to the tune of Rs 3.50 and Rs 4 respectively. ITC surged by eight per cent driven by rumours of a bonus issue.
While a section of market players feel that the current levels are not sustainable, select fund managers are of the opinion that the rally is not only sustainable but also will see another bout of FII funds flow into the markets.
"The current rally is bound to be sustainable. FIIs have picked up sectoral stocks which should see aturnaround only in the long run. This signifies that their long term perspective."
"We are witnessing a consolidation phase where we see punters moving out and institutions coming in. There should be no panic dip although select correction could be expected," said Vinay Bajpai of Khandwala Securities.FII buying was witnessed at the counters of L&T, SBI, Reliance, Telco, Bank of Baroda and NIIT.
Second rung software counters like Wipro and Krone Communications registered substantial jump on the BSE on account of the change in the base price on the bourse. While fundamentals explain the rally based on the sectoral and stock specific performance, technical analysts seem to have build a consensus that the index is heading towards 4,200 levels. "On Friday if the Sensex breaches 3,750 the next stop would be at 3,825 which should provide a breather to the index," said Neel Dalal, BSE broker.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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