Sensex poised to touch new high

The tremendous response to Coal India's $3.5 (Dh12.84) billion IPO, the largest initial share sale by an Indian company, has underscored the voracious investor appetite for stocks in a rapidly growing economy — and should keep the Sensex firmly placed to make an assault on record highs.

The world's largest coal miner received bids for about $49 billion, with foreign funds leading the surge. The 631.6 million shares on offer were subscribed 15 times, and the government is expected to price the 10 per cent sale at the top end of the indicated Rs225 to Rs245 a share range.

"The offering has drawn in a big chunk of new investors and new money," said equity strategist Mohit Sen. "I did bet the market will be awash with cash when the refunds to unsuccessful bidders begin in two weeks."

As bulk of the bids were from overseas institutions, the chances of the funds moving to other growth stocks in the market are seen high. With corporate earnings mostly reaffirming robust demand, the outlook is staunchly bullish.

Tata Consultancy Services, the country's biggest software services company that gets more than 90 per cent of its revenue from exports, soared to a record high on Friday after it reported a 30 per cent rise in quarterly profit to Rs21.06 billion and said demand for outsourcing was picking up momentum.

The company, whose clients include Citigroup and General Electric, aims to hire more than 50,000 people in the current year ending next March to meet improved orders from clients and deal with high attrition levels, global human resources chief Ajoy Mukherjee said.

Bajaj Auto, the second-biggest maker of motorcycles, posted a 69 per cent jump in September quarter profit to Rs6.82 billion while sales climbed 50 per cent to Rs41.8 billion.

Foreign buying

Sesa Goa, the leading private-sector miner of iron ore, said its quarterly profit more than doubled to Rs3.85 billion on better prices for the raw material it exports to China in a big way. Total income grew 70 per cent to Rs9.18 billion.

The top-30 Sensex eked out a 0.2 per cent gain last week to 20,165.86 after swinging widely as investors plumbed for the Coal India IPO that was open Monday to Thursday. The benchmark is just over 1,000 points away from its record high of 21,206.77 set on January 10, 2008.

Sen said he expected index to breach the landmark before Diwali, the festival of lights, in early November, powered by more foreign buying.

Foreign portfolio investors have bought shares worth a record $24.2 billion since the beginning of January and there is a good prospect of the net inflow reaching $30 billion by the end of December with large share sales in the offing.

Power Grid Corp and Steel Authority of India Ltd have planned to raise $1.9 billion each through follow-on share sales between mid-November and the end of December, while Hindustan Copper will raise $750 million. Indian Oil Corp hopes to raise as much as $4.3 billion in the March quarter.

Societe Generale global strategist Dylan Grice said the combination of healthy government finances, young populations and hard-working people with low income levels makes developing nations "compelling" investment destinations.

"Emerging-market valuations could go much further before they could be considered seriously stretched," he wrote in a report, adding stock markets in the biggest developing nations may double as the Federal Reserve's monetary stimulus sends valuations back to their 2008 peak.

The writer is a journalist based in India