Bull Charge On Frontline Stocks

New Delhi, June 26: | Updated: Jun 27 2003, 05:30am hrs
You cannot ignore them for long. Bulls are now charging towards frontline stocks after having a feast in mid-caps last month. Overshadowing mid-cap stocks, market heavyweights such as HLL, Reliance, Infosys, Wipro, Hindustan Petroleum, ITC, MTNL, Dr Reddys, VSNL and Grasim Industries together have created a massive wealth of Rs 20,270 crore in June compared with Rs 6,180 crore in May.

In contrast, NSE Nifty Junior representing 50 major mid-cap stocks could create only Rs 3,360 crore during June 1-25 compared with Rs 14,300 crore during the previous month.

Sensex Up 35 Pts
Mumbai: Led by cement stocks, equities made further headway, pushing the sensex up by 35 points at close on Thursday on sustained buying support by operators as well as fresh purchases from foreign institutional investors.
Market sources say the sharp shift in activity towards frontline stocks has been mainly aided by hefty foreign fund buying. Indicating the flush of FII money, foreign portfolio investment has touched a high of Rs 1,870 crore till June 23 during the current month.

Indiabulls equity analyst Dinesh Chandel says: The action in the top rung stocks is driven by FII money which has been pouring into the Indian markets. Stocks like Hindustan Lever and ITC, which have so far been underowned, have also attracted institutional funds.

In June, NSE Nifty 50 has surged 9.92 per cent while Nifty Junior underperformed with a rise of 5.58 per cent. On June 25, BSE Sensex has breached 16-month high.

The bullish uptrend is expected to continue. Says Mr Sharad Shukla, head of portfolio management services, IL&FS Investsmart: We continue to be bullish on the markets. Even at these levels, the forward price earning multiples for the frontline stocks are still reasonable. The market has entered a long-term bull phase and investors who want to take long-term exposure should utilise corrections as an opportunity to enter the market.

Top wealth creators in Nifty were Hindustan Lever (Rs 4,094 crore), Reliance (Rs 3,666 crore), Infosys Technologies (Rs 3,089 crore), Wipro (Rs 2,243 crore), Hindustan Petroleum (Rs 1,627 crore), ITC (Rs 1,207 crore), MTNL (Rs 1,172 crore) and Dr Reddys (Rs 1,153 crore). Total wealth created by Nifty stocks was over Rs 33,300 crore.

Only five out of the 50 Nifty stocks turned out to be marginal wealth destroyers during the period. The wealth destroyers are Digital Global, Shipping Corporation of India, Glaxo, HDFC Bank and Britannia Industries. The counters saw market capitalisation erode by a combined Rs 590 crore as against the remaining 45 Nifty stocks which created investor wealth worth over Rs 33,900 crore.

PSU banking stocks, which were leading the mid-cap rally, have proved to be major wealth destroyers among other Nifty Junior stocks in June. Top losers included Punjab National Bank (Rs 687 crore), Bank of India (Rs 191 crore), Andhra Bank (Rs 171 crore), Cummins (Rs 114 crore) and Pfizer (Rs 75 crore).

While Nifty Junior stocks have seen their market capitalisation rise by Rs 3,360 crore, Steel Authority of India alone contributed about Rs 1,950 crore. The other 49 stocks could create only Rs 1,400 crore in June.

Major Nifty gainers in terms of stock prices included VSNL, BSES, Grasim Industries, Indian Hotels, MTNL, Infosys Technologies, Dr Reddys, Hindustan Petroleum, Tata Power and HCL Technologies. These stocks surged 15-42 per cent during the period.

The heavy activity in these counters is not purely speculation, but value investing by institutions and, of late, retail investors. Onset of monsoon, easing of inflation, Maruti Udyog receiving overwhelming investor response to its initial public offer, rising liquidity on the bourses and Reliances series of oil and gas discoveries are major drivers, according to analysts.

Nevertheless, market is eagerly waiting for first-quarter results for direction. This is reflected in July futures contracts of Nifty which are currently trading at a discount to spot markets.