Budget propels Sensex up 3.44 per cent

The Sensex ended last Friday at 16,994,up 3.44 per cent compared to its closing level at the end of the previous week.

The Sensex ended last Friday at 16,994,up 3.44 per cent compared to its closing level at the end of the previous week. The index is currently trading at a 12-month trailing price to earnings PE ratio of 20.75. Foreign institutional investors FIIs invested Rs 4,334.7 crore in Indian equities last week.

Commenting on the markets rise,Avinash Gupta,assistant vice president,research-equity,Bonanza Portfolio said: The budget was presented in Parliament on Friday,which was the last trading session of the week before the last. The budget indicated that the reform process is in place. Market participants read the budget during the long weekend and realised that no major negatives are hidden in its fine print. This led to the rally in the market. The news from overseas and the return of buying by FIIs also strengthened buying sentiments.

The two sectors that rose the maximum this week were BSE Metal up 7.06 per cent and Realty up 6.92 per cent. The metals market in India is no longer insulated from global markets. Price movements overseas influence domestic prices also. The outlook for Metal stocks also gets moderated accordingly, said Gupta. As for the rise in realty stocks,he said: The market had felt that the imposition of service tax on construction-linked payments would be highly negative for real estate sector. However,subsequent clarifications revealed that the actual impact of the service tax would only be about 3-4 per cent and not 10.33 per cent,as apprehended earlier.

The following two sectoral indexes rose the least last week: IT up only 1.06 per cent and PSU 1.18 per cent. Explaining their weak performance,Gupta said: These sectors had risen significantly in the recent past and the budget did not have anything significant to trigger a further rally in these sectors. Moreover,the enhancement of MAT,and the fact that income-tax benefits to STPIs were not extended were definite negatives for IT stocks.

As for the future,says Gupta,Europe remains a hotspot and developments there could influence the markets globally. Moreover,the Indian rupee has been gaining against the US dollar. A sizeable strengthening of the rupee against the US dollar could have an impact on the markets. The IIP data due next week will also have some effect, said Gupta.