Relief rally helps Sensex re-enter the 14000 orbit

MUMBAI: Dalal Street punters live by the day. While their troubles are far from over, they may get a brief respite, or even a reason to celebrate with the ruling UPA coalition winning the trust vote.

It may be naive to believe that the government will push through tricky reforms with elections less than a year away, feel some market observers. But, investor sentiment may improve on hopes of a few PSU divestment and small doses of changes in the sectors like banking, insurance and pension.

Earlier in the day, benchmark indices surged nearly 2% as the market almost seemed to have taken it for granted that the government would win the trust vote. The fourth successive session of gains propelled the 30-share Sensex above the psychological 14,000-mark, with the index ending the day at 14,104.20, up 254 points over the previous close. The 50-share Nifty climbed 80.60 points to close at 4240.10.

“While the effect of the trust vote would be visible over the next 2-3 days, the focus would soon shift to oil, inflation and interest rate,” says Tata Asset Management CEO Ved Prakash Chaturvedi. While crude oil prices are slipping further to $126 to the barrel, the stage appears set for a strong rally on Wednesday.

“The economy is slowing down thereby impacting earnings and valuations. The earnings growth will finally decide the direction of the market,” he added. First quarter earnings of key companies announced so far have fallen short of market expectations.

“One might expect some reform measures in the near future, but it’s a case of wait and watch,” adds Mr Chaturvedi who also thinks that the market is “very close to the bottom if not at the bottom”.

Fast moving consumer goods, banking, power and metal shares were the best performers, while investors shunned shares in the automobile and realty sectors — both of which are expected to be hit hard due to the rise in interest rates. Centrum Stock Broking research head Harendra Kumar feels that Tuesday’s rise was a “technical pull-back” and that the “downturn is still on”.

“The impact of high interest and slowing economy has been limited to the bottomline of most companies. The topline is likely to register a hit in the next one quarter or so,” says Mr Kumar. Market players are expecting some reforms, especially in the banking sector, in the next six months, he added.

Consensus is that the Sensex could rise to 16,000 near term, and then slip back into a trading range between 13,000 and 16,000. Stock futures of most Nifty stocks were quoting at a premium to spot, after being at a discount for the better part of the current settlement cycle. But market watchers attributed the trend largely to short covering of positions.

Foreign institutional investors, too, do not think that it is time to start buying shares aggressively. According to provisional data on BSE, foreign funds net sold close to Rs 600 crore worth of shares. While talk is that retail inflows into the market are slowing, domestic institutions appear flush with funds for the time being. Provisional data showed local institutions net bought Rs 261 crore worth of shares.
thanks to :- economictimes.indiatimes.com