Pre-Budget rally takes Sensex to 6,700

In the last two sessions, the Sensex has gained 101.50 points. From its recent low of 6,106.43 on January 24, the Sensex has so far gained 612.90 points.

The broader 50-share S&P CNX Nifty index gained 16.20 points to end at 2,098.25.

However, the Nifty did not breach its all-time trading high of 2,115 clocked on January 3, and its lifetime closing high of 2,120.15, which it hit on January 4.

‘‘The mood in the market appeared optimistic on expectations of an investor-friendly Union Budget, to be announced later this month. Expectations have already started building up on the Budget. The market undertone is positive, but the Sensex is not expected to see a dream run from the current levels,’’ said Andrew Holland, chief administrative officer & executive vice-president, research, DSP Merrill Lynch.

Said a dealer from a foreign brokerage: ‘‘Liquidity is driving the market. Fresh inflows, especially from FIIs, are lifting the market. However, at current levels, the market is in an overbrought position, which is why profit-booking is witnessed at higher levels.’’ As many as 23 new FIIs have registered with Sebi in the first 45 days of 2005. The total number of registered FIIs now stands at 662.

In February 2005 so far, both FIIs as well as mutual funds have been net buyers in equities to the tune of Rs 3,813.20 crore and Rs 40.28 crore, respectively. On last Friday, FIIs pumped in Rs 249.50 crore in equities.

Of the 11 sectoral indices of the BSE, four of them — BSE IT, BSE Metal, BSE Bankex and BSE Capital Goods — hit its new all time highs. Buying was also witnessed in mid-cap stocks, with the CNX Midcap 200 also closing at its lifetime high of 2,787.95, after touching an intra-day high of 2,817.15.

Infosys Technologies, Satyam Computer, Wipro, State Bank of India, ICICI Bank and Bhel were mainly responsible for the rise in the Sensex.

Meanwhile, a section of marketmen are apprehensive about the one-way upward movement of the market. ‘‘Too much cash is chasing few shares. Investors need to be cautious,’’ said a BSE dealer.

Expectations have already started building over the Budget. There are hopes of cut in excise duties in a number of sectors. Investors expect Finance Minister P. Chidambaram to reveal more details about economic reforms in the Budget.

The market expects the Budget to unfold various reforms, including tax reforms and an easing in the foreign investment ceiling in banks.

The market is expecting the government to rationalise the tax structure, which could result in a fall in the corporate taxes.