Sensex likely to gather strength as week advances

Buoyed by the current feel-good factor, the Indian share market is expected to remain bullish this week. Barring minor corrections at regular intervals, traders and analysts see room for further upside in the coming days.

"With the new exposure margins for brokers in the derivatives market coming into force on Monday, the index may come under slight pressure. However, the market is expected to gather strength as the week progresses," said Antony Sequeira, managing director, Arcadia Share and Stock Brokers. He said more mid-cap stocks are expected to join the party this week.

The Bombay Stock Exchange index, the Sensex, gained 1.3 per cent last week to close at 4,971.57 points. On the National Stock Exchange, the Nifty index finished at 1,592.05 points, up 2.3 per cent on the week.

The Indian share market created history again on Monday when the Sensex zoomed past the key 5,000 mark and the Nifty index crossed the 1,600 level backed by a wave of buying across the board.

Panic selling

However, the index shed some of its gains and closed below the 5,000 mark on Friday as profit-booking continued in frontline old as well as new economy blue-chips. The index had touched an all-time high of 6,150 points on February 2, 2000.

The Sensex, which has appreciated over 60 per cent in the past 12 months, has outperformed other emerging markets, making India one of the fastest gainers in the global markets this year.
Market players say the surge in share prices has been fuelled by foreign institutional investors (FIIs), who have pumped in close to $5 billion since January this year.

"The benchmark index may witness some corrections. I don't see any panic selling as long as the Sensex stays above 4,902 levels this week," said Shankar Char, head of institutional sales at Cholamandalam Securities. Shares prices staged strong rally after the central bank announced its busy credit policy on Monday.

While the leaving the repo and bank rates unchanged against the market expectations, the Reserve Bank of India has cheered investors by revising the economic growth rate upwards at 6.5 to 7 per cent.

"Good monsoon, bumper corporate results, higher economic growth projection and aggressive foreign fund inflows are currently driving the markets. With the Business Confidence Index touching an eight-year high, the mood in the market to remain bullish through the rest of the year," said the head of a domestic mutual fund.

Retail participation

Oil PSUs are expected to draw attention this week after petroleum minister Ram Naik on Thursday proposed a 12 to 15 per cent equity dilution in two oil majors, ONGC and Indian Oil Corp. The minister said the government stake could be offloaded in the market to help bridge the fiscal deficit.

The government had earlier said that GAIL, ONGC and IOC would remain the flagship companies in the oil sector where New Delhi would hold a minimum stake of 51 per cent. Interestingly, the government currently holds around 80 per cent stake in IOC and ONGC.

"With the retail participation slowly gaining momentum, we expect the current rally to gather steam in the coming weeks," said a dealer at a leading Mumbai brokerage.