Shares to remain bullish for next couple of weeks

With hardly two weeks left for the second quarter earnings season to kick off, traders and analysts expect the Indian share market to remain bullish for the next couple of weeks. They say sustained buying interest in old economy stocks, coupled with strong inflow of funds from foreign institutional investors is driving the market.

"The benchmark index is moving towards 4,475 this week backed by strong liquidity. Automobiles, steel, pharmaceuticals, banks and cement are good picks," said the head of equity sales at a city brokerage. The market is expected to witness hectic activity in the next couple of weeks, according to him.

The Bombay Stock Exchange's popular equity index, the Sensex, closed last week at 4,382.57 points, up 3.9 per cent on the week. On the National Stock Exchange, the Nifty index gained five per cent to finish at 1,386.95 points.

Share prices jumped to a two-week high on Friday as investors took fresh positions after the expiry of September contracts in the derivative segment.

Foreign funds continued to be on a buying spree, picking up blue-chip stocks, on the ground that valuations in the Indian market still remain attractive. Expectations of a higher GDP growth have also fuelled heavy foreign fund buying of Indian equities, with net FII investments jumping to $3 billion till September 25 this year.

Fresh boost

"The market is very positive and I expect the Sensex to touch 4,600 level before the Diwali festival," said Antony Sequeira, managing director, Arcadia Share and Stock Brokers.

He said technology counters are expected to draw attention ahead of a flurry of quarterly results from IT majors, led by Infosys Technologies in the second week of October.

But traders and analysts are worried about the rising rupee value and the last week's jump in oil prices following the Opec's decision to reduce crude output. The rising rupee value poses a major threat to software services companies that depend on the U.S for more than 70 per cent of their revenues.

Telecom counters may attract attention this week after the government has decided to raise foreign investment limit in the telecom sector from the current 49 per cent to 74 per cent on condition that the management control could stay with the Indian partner.

PSU stocks are expected to receive fresh boost following reports that the government is considering the option of seeking a review of the Supreme Court verdict on HPC: and BPCL divestment by a larger bench.

The option for promulgating an ordinance is also under the serious consideration of the government after Prime Minister A.B. Vajpayee returns from his overseas tour.

Most analysts believed that the BJP-led government is unlikely to take any swift action keeping an eye on the general elections to be held next year. Doubts have also surfaced over the sale of residual equity in privatised companies such as VSNL, IBP and IPCL.

The privatisation of Shipping Corp. India, Rashtriya Chemicals and Dredging Corp. could also be delayed following the court verdict.

Good performance

It is expected sentiment will also be boosted by next month's monetary policy review by the central bank, which is expected to maintain the ongoing low interest regime.

"Tech stocks will gain as after nearly eight quarters there are feelers coming from the leading software companies of a good performance for the quarter ending September," said a fund manager with a domestic brokerage.

He said trading will be volatile with bouts of intra-day profit bookings, but the bullish undertone will be maintained as foreign funds continue with their purchases. "I won't be surprised if India emerges as the largest invested market for foreign investors in Asia this year," he added.

Dealers said other sectors that would be keenly bought are cement and automobiles.