Markets: On the horns of the bulls

Rajiv Singh
06 December 2004

Will the bulls continue to snort and toss or will the bears wake early from hibernation? Sentiments clearly point North — but past experience can also make the enthusiast jittery!

Mumbai: After the sensex touched the psychological 6,000 mark with the mahurat trade on Diwali the bulls have ever since upped their horns and run away with the market. Last week, the 30-share sensitive index broke all previous records, soaring a hefty 4.77 per cent to finally close at 6,322.76. The net rise of 287.73 points has been the largest weekly rise for the sensex this year.

The weekly trades saw high volatility with prices moving up steeply to new record levels. The sensex smashed the previous all-time closing high of 6,194, touched on January 14 this year, by 77 points on Thursday last week, to close at an all time high of 6,234. The closing session for the week witnessed another all time intra-day high of 6,361.53, with the previous intra-day high of 6,249.60 last recorded on January 9 this year. The week witnessed high volatility, with the index moving between 6,361.53 and 6,029.82, finally closing at 6,322.76.

On the National Stock Exchange, The S&P CNX Nifty wasn't to be left behind and has done even better, registering an increase of 198 points or 11 per cent since November 1. The sensex, in comparison, has gained 618 points, or 10.83 per cent, since November 1.

Last week, the Nifty gained 95 points or five per cent to close at 1996, after reaching an intra day high of 2011.

The volume of business for the week, on both the BSE and the NSE, showed impressive growth at Rs12,048 crore and Rs29,181 crore respectively, as compared to the previous week's turnover of Rs.7,935 crore and Rs18,064 crore respectively.

The foreign hand
The FIIs were the surprise package of the week, and their aggressive purchases prevented profit selling domestic funds and investors from dampening the sentiment. In the last five trading sessions alone, FIIs have pumped in more than $700 million into Indian stocks, that is Rs.2,700.40 crore. More than $1.4 billion have been invested in the month of November, and the total FII investments in 2004 have crossed $7 billion, that is more than Rs32,000 crore. For the record, it may be mentioned, the domestic mutual funds were sellers throughout the week (Rs391.78 crore).

Pondering over the aggressive FII intervention in the home market, analysts point out that the Dow index has so far provided returns of six per cent in the last six months. The Sensex, meanwhile, has already gained more than forty per cent since its infamous crash on May 17 this year, and have provided the required enticement to the FIIs.

But there are other factors as well that would have swung FII sentiment. With the US dollar falling more than two per cent against the rupee last week, investing in US stocks would have become less attractive for foreign investors. As the calendar year draws to a close most FIIs are due to make fresh investment plans, and a robust NAV for their India investments would help making allocations for the Indian markets next year so much easier. Further with crude prices tumbling, by 13.4 per cent in three successive days during the week to $42.54 a barrel, the bulls had all the more reason to tilt the graph lines upwards.