Sensex likely to post further gains

The Indian share market is expected to post further gains this week after the key equity index rose 4.7 per cent last week, backed by strong quarterly earnings numbers and sustained inflow of funds from foreign institutional investors.

The Sensex closed last week at 4,768.90 points, up 4.7 per cent on the week. On the National Stock Exchange, the Nifty index gained five per cent to finish at 1,523.10 points.

"The benchmark index is racing towards 4,850 level this week backed by strong quarterly figures. Old economy shares led by PSU and banking stocks are expected to remain in the limelight till all corporate results are announced," says the head of equity sales at a Mumbai brokerage.

The biggest draw for the market will be a new bunch of quarterly earnings figures to be released this week. Investors are bracing for hectic activity as the index heavyweight Reliance Industries, the country's larg-est private company, unfolds its results on Thursday.

The market has witnessed a broad-based rally with cement, aluminium, pharmaceuticals, banking, automobile and power stocks reaping fat gains.

Tax benefits

The Sensex has touched a 39-month high on Friday after Infosys Technologies cheered the market with better-than-expected second quarter profits and higher earnings guidance for the current fiscal.

Foreign investors have pumped in close to $400 million into Indian equities over the first five days of October, compared to $855 million in the whole of September. Overall inflows to the tune of $3.5 billion since January are reported to be the highest in a single year.

FIIs are cheerful after the Supreme Court allowed foreign investors to use a residency certificate issued by the Mauritius authorities to seek tax benefits under the Indo-Mauritius treaty to avoid double taxation.

Cash market

The court has ruled that all tax concessions allowed under the treaty will be available to those residing in Mauritius as long as they produce a residency certificate.

FIIs have pumped in close to $20 billion into the Indian market after the government opened its door for foreign investors in 1992. According to market sources, nearly half of the overall foreign investments in India have been routed through Mauritius-based subsidiaries of large funds.

Foreign funds have also become major players in the derivatives market, lured by high spreads between the cash and futures prices. Volumes in the derivative market have jumped over 235 per cent in the past five months, leaving the cash market way behind.