Sensex crosses 4,000 as FII buying spree continues

Marketmen said after witnessing a technical correction on Wednesday, stocks staged a quick recovery following sustained buying by foreign institutional investors. Ahead of Friday’s settlement, speculators who went short (sold shares without making delivery) on Wednesday on expectations of correction in stock prices were trapped and covered their positions on fears of further rally.

The sentiment was so bullish that even disappointing working results by automobile major Telco – which showed a 67 per cent plunge in its net profit for the fiscal ended March 1999 – was also discounted by the market. “The market was mainly driven by aggressive buying by foreign funds. Several stocks were seen hitting upper side circuit breaker and trading was stopped,” said another stock broker.

The market has been rising since the dissolution of the Lok Sabha on April 26 – except for Wednesday – following heavy purchases by foreign funds. Market sources estimate that FIIs have bought shares to the tune of Rs 1000 crore (around $ 233 million) in the last 12 days. This is on top of FII purchases of another Rs 1000 crore in the month of April. With FIIs still continuing their purchases, marketmen expect FIIs to bring in another Rs 1000 crore, thereby making total purchases of around $ 500 million for the month of May.

The markets opened on a strong note on Thursday. Sensex started at a high of 3957.25 points and then reached the day’s high of 4022.08 points on continuous support from FIIs but did not go below its opening level. Finally after a busy day, it ended at 4014.68 points to register a gain of 137.79 points as compared to its yesterday’s close of 3876.89 points. On the other hand, the S&P CNX Nifty index of the National Stock Exchange too mirrored the same trend and recorded a gain of 37.20 points for the day closing at 1148.10 points as compared to its yesterday’s close of 1110.90 points.

Almost all the scrips in the A group scored huge gains on Thursday. The market capitalisation of leading pivotals also jumped and more than recovered the losses in April when the political turmoil triggered a stock crash. FIIs once again accumulated stocks of pharma, software, FMCG and commodity stocks. ACC, Hindustan Lever, Tisco, Reliance and even Telco were gainers.

The market is moving purely on FII fund flows. With the US economy booming and surplus money in their hands, FIIs are looking at the Indian markets. India has turned out to be a better market in the Asian region. With Malaysia reversing some of the economic reforms and FIIs not trusting the Hong Kong markets, they are pouring money into safer markets like India. On the other hand, the Indian economy is doing well with low inflation rate, higher exports and forex level and improved corporate performance,” said the chief investment officer of a leading foreign investment firm.

The 769-point rally in the last fortnight is one of the biggest gain in the last five years. Earlier, Sensex had witnessed a 588-point jump in February-March 1997. This time the rally is likely to sustain for a longer time with the Sensex set to touch the 4,250 level.