Bull run likely to continue

The current upswing in the Indian share market is expected to continue this week after the key equity index gained 2.9 per cent last week, backed by huge retail participation coupled with strong inflows from foreign institutional investors.

The Bombay Stock Exchange's benchmark index, the Sensex, closed last week at 4,369.17 points, up 2.9 per cent on the week. On the National Stock Exchange, the Nifty index gained three per cent to 1,398.40 points.

"I expect the broad-based rally to continue this week. The index is poised touch the key 5,000-mark this year, if the current trend is any indication," said a dealer at a leading city brokerage. "Pharmaceuticals, steel, cement, oil and banks are good picks."

But some analysts have expressed doubts about the sustainability of the current stock rally as signals from the broad market indicate that the party may be beginning to lose steam. Traders say that gains of the past couple of days have largely come from index heavyweights such as Reliance Industries, Hindustan Lever and ITC.

Share prices rose across the board last week backed by hopes of strong recovery in the U.S. economy. Shares of pharmaceutical firms, petrochemical companies, banks, refiners and fast moving consumers goods producers witnessed brisk trading as investors expected the companies to benefit from rising product prices stemming from higher industrial activity.

Daily turnover on the country's leading bourses has almost doubled since March with the BSE and NSE reporting turnover worth Rs20 billion and Rs42 billion respectively. Investors were worried after the leading exchanges suffered a 70 per cent drop in trading volumes last year.

Analysts say higher liquidity and large foreign fund inflows into Indian equities are driving markets. Over the past ten years, foreign institutional investors (FIIs) have increased their exposure in Indian stocks with investments to the tune of $18 billion.

FIIs have pumped in over $2 billion since January, fuelling almost 50 per cent surge in the Sensex from the six-month lows in April.

Technology stocks joined the party at last with major players like Infosys Technologies, Satyam Computer and Wipro reporting good gains. Traders say that a recovery in U.S. technology spending coupled with the recent gains in Nasdaq index may provide some relief to Indian software companies.

But the rising rupee value is a huge dampener for software services companies that depend on the US for more than 70 per cent of their revenue. The rupee has gained 4.5 per cent against the U.S currency since January this year.

Cement counters witnessed hectic activity for the past three weeks as market players expect cement firms to raise prices by the end of this month. But industry sources say that a revision in prices is most unlikely before October.

In a major move to check volatility in the market, the BSE and the NSE have jointly imposed 10 per cent additional margins on 16 hot shares last week. Officials say shares of Digital GlobalSoft, Hexaware, Adani Exports, SAIL, Satyam Computer, SBI, Tata Steel, Essar Steel, HughesSoftware, Mastek, Geometric Software and Divi's Laboratories are found to be the hot favourites of day traders.

Strong inflows from FIIs
- The index is poised touch the key 5,000-mark this year

- Daily turnover on the country's leading bourses has almost doubled since March with the BSE and NSE reporting turnover worth Rs20b and Rs42b respectively

- The rupee has gained 4.5pc against the dollar since January this year