No byte in Y2K bug, markets explode

MUMBAI, JANUARY 3: Indian punters greeted the new millennium and the absence of any damage from the Y2K bug with a Rs 100,000-crore increa...

MUMBAI, JANUARY 3: Indian punters greeted the new millennium and the absence of any damage from the Y2K bug with a Rs 100,000-crore increase in collective shareholders wealth at the Bombay Stock Exchange. Today8217;s frenzy was largely driven by local investors, but it is expected that foreign investors will follow suit in a few days after remaining on the sidelines for a few weeks to see what the Y2K bug would do to India8217;s banks and other institutions.

The frenzy, which saw the BSE sensex go up a mindboggling 369 points or 7.4 per cent, taking it to a historic high of 5,375 points, comes on top of a 64 per cent rise in market cap in 1999 8212; the previous high of 5,075 took place on October 14, when the market was euphoric with the return of the BJP-led National Democratic Alliance.

Not surprisingly, infotech stocks were the stars of today8217;s bull-run, and most software shares hit the upper circuit filters 8212; after their prices rose eight per cent 8212; and trading in them was frozen. A total of 84 scrips in theA8217; group hit the upper circuits and trading in them was stopped for the day.

Market favourite Infosys Technologies closed up Rs 1,161.25 at Rs 15,677.50 where it was frozen in early deals. Heavyweight Hindustan Lever ended 6.2 per cent higher at 2,391.20. Other leading counters like ACC, ITC, Larsen, Reliance, SBI, Telco and Tisco are among 84 A8217; group scrips which hit the circuit breaker.

The bug-didn8217;t-bite celebrations, of course, weren8217;t restricted to India as investors came out with huge orders in all markets that weren8217;t closed today. In Germany, the DAX went up a whopping 3 per cent to cross a historic 7,100, Singapore8217;s Straits Times Index went up over 4 per cent, Hong Kong8217;s Hang Seng jumped 2.4 per cent, Malaysia 2.7 per cent, and even neighbouring Pakistan saw its index go up 3.4 per cent. Markets in the UK, Japan, South Korea, Australia, and Taiwan remained closed today.

8220;A very exciting start to the new year,quot; declared Sangeeta Purushottam, head of research at SG Asia Securities8217; Indiaoffice. 8220;Relief of Y2K being over without any glitches and hopes of fresh money coming in has buoyed sentiment,8221; she said. Says Venkatesh Aiyar, a dealer with broking firm R K Chari: 8220;Everyone is buying today8230; from local institutions to FIIs. Mutual funds and individual buyers also joined the buying spree as there was no bad news to prevent the Sensex from going up.8221;

8220;With the Indian economy on an upswing, Y2K fears over, and more good news like 100 per cent HDFC millennium dividend, we are set for some new records,8221; said Aiyar. Dealers said shares across most sectors had risen in morning deals but information technology shares were at the helm, with several at the eight per cent circuit breaker limit. 8220;The markets have gone crazy,8221; said Purvesh Shah, chief dealer at KJMC Capital Market Services.

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All the 11 critical sectors identified by the government reported a snag-free millennium transition, officials said at the weekend. Traders said sentiment was strong as the market pinned its hopes onheavy buying by foreign funds in the days ahead. 8220;Fund flows should be better than expected this year. Regional economies are looking up and that sentiment should rub off,8221; said Nilesh Jain, vice-president of institutional sales at Motilal Oswal Securities.

According to the Securities and Exchange Board of India, foreign funds invested over 1.5 billion in Indian markets in 1999. However, the market sentiment could deteriorate towards the middle of January as third quarter results in some sectors could be disappointing, but position-taking ahead of the Union Budget may provide support later on.