Funds Hope to Ride on the Boom

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Ruma Dubey, Special to Arab News

Published — Monday 5 January 2004

Last Update 5 January 2004 3:00 am

BOMBAY, 5 January 2004 — The year 2004 has been ushered in with a lot of fanfare. The Indian stock market created history on the second day of 2004 when it crossed the 6,000-mark. On Jan. 2, 2004, the Bombay Sensex closed at 6,026.59.

The Sensex had first hit the 6,000 mark in the year 2000. The highest point reached by the index was 6,150, on Feb. 14, 2000.

And in this surge to history, the front runner on the bourses in 2003 has been Reliance Industries (RIL). It has emerged as the top contributor to the index. RIL contributed 839 points to Friday’s sensex closing of 6,027, infact on that day, it hit an all-time high of Rs.589.70.

Infosys Technologies was the second highest contributor but its weightage has fallen substantially from 18 percent to 8.7 percent. FMCG company Hindustan Lever Ltd. (HLL) was the third highest contributor to the Sensex and its weightage has fallen to 7.3 percent from 20.6 percent.

Analysts say that this current rally on the bourses has been historic in another sense. Apart from crossing the 6,000-mark, investor interest has become wider. Instead of being influenced by just a few pivotals, altogether 21 scrips contributed more than 100 points to the Sensex’s rise on Jan. 2. ICICI Bank, ITC, Ranbaxy Labs, SBI, Tata Steel, L&T, HDFC, Hindalco, Satyam Computer and Tata Motors have also been major contributors to the Sensex.

On Dec. 1, 2003, a total of 71 companies hit their all-time highs. ABB, Bhel, BPCL, Reliance Energy, Bharti Tele-Venture, Corporation Bank, Grasim, HPCL, IPCL, Indian Oil, ONGC, SBI, Reliance and Tisco touched a new 52-week high.

Foreign financial institutions (FIIs) have been major contributors to the Indian bourses in 2003. Their purchases during 2003 totaled nearly $6.7 billion, the highest since they were allowed to invest a decade ago. Analysts expect that with economic fundamentals continuing to remain it is expected that their allocation for Indian markets will be generous.

Infact forex exchange reserves edged up further by $541 million to $100.59 billion for the week ended Dec. 26 as against $100.05 billion the previous week. Foreign currency assets moved up from $96.01 billion to $96.55 billion. Gold reserves and SDRs remained unchanged at $4.04 billion and $3 million, respectively.

With a booming stock market, the Indian mutual funds industry has also done very well. Infact there were some mutual funds which gave a return of over 100 percent. And now for 2004, mutual funds hope to ride on the boom. There are many new big players expected to enter the industry this year. More bank-sponsored and foreign players will be entering the market this year.

There will be a lot of sectors or industries which are expected to catch the fancy of the investors this year. Amongst the few sectors which are likely to come out of hibernation are fast moving consumer goods (FMCG) and information technology (IT) services.

Elections are expected to play a very important role in the markets. The general consensus is that if there are early elections and the current government comes back to power, then public sector stocks could be hogging the limelight. If the elections are held in April, then divestment of PSUs could be on the block by July 2004.

One new sector which is expected to catch the fancy is mining as in the global markets, mining companies have seen a sharp re-rating due to the commodity boom all around.

MNC pharmas are also expected to do well. Steel stocks which have been the star performers of 2003 and due to this, analysts say that this sector could see some amount of profit-taking by mid-2004.

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