The Hindu Business Line : Bush, corporates' performance ignite sentiment

AFTER a slightly hesitant start to the week and a relatively lacklustre performance during the previous one, the stock markets showed clear signs of a break away into a more consistent, strong rally on Wednesday. Sentiment in the markets during the mid-week session seemed to be clearly influenced by two factors.

One was the possible outcome of the US Presidential elections, where the initial polling estimates were pointing to a victory for Mr George W. Bush. With the chances of Mr Bush coming back into the White House growing, the sentiment in the bourses seemed to have turned in favour of information technology stocks.

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It was widely believed that the other Presidential candidate, Mr John Kerry, harbours strong anti-outsourcing views. The prospect of his winning had had a dampening effect on technology stocks during the last few weeks.

On Wednesday, the trends seemed to indicate a possible win for Mr Bush and this news seemed to have a salubrious effect on select software counters of companies that are particularly dependent on clients who are located in that geography.

The other factor that seems to have influenced the surge in buying support from both institutional and individual investors was the delayed effect of a fairly strong showing by corporate India.

The good performances by the companies in the commodities business and the sustained growth in domestic demand across sectors, as is evident from the monthly volume data, despite the rise in inflation, have been influencing stocks for the past few weeks.

The dip in oil prices has also contributed to the increased optimism at the bourses, since the rise in crude prices was being seen as a dangerous portend to a potential fall in profits during the second half of the current fiscal. Steel, cement and select commodity stocks were all gainers during Wednesday's rally.

At the BSE, the 30-share Sensitive Index (Sensex) was up sharply by over 1.5 per cent or about 88 points at 5,842 points. After starting the session at the day's low of about 5,771 points the Sensex never looked back and except for a mild dip during mid-session, the index had a consistent upward bias. The Sensex's close at 5,842 points was also almost next to the index's day's high level of 5,845 points.

Of the Sensex 50, there were a total of four stocks that gained during the Wednesday's session for every stock that lost ground.

However, despite the heightened activity, the volume and value of traded stocks continued to be relatively low. There were a total of 1.7 crore shares that changed hands with a traded value of Rs 795 crore. The sectors that witnessed heightened activity and posted gains included IT, cement, steel, banking and select pharmaceutical stocks. However, despite the surge in buying interest for old economy stocks, automobile stocks did not meet with much demand on Wednesday.

Amongst the stocks that posted gains from out of the Sensex 50 included ACC, Bharti TeleVentures, BHEL, Dr Reddy's Laboratories, Grasim Industries, HDFC Bank, Hindalco, HLL, HPCL, HDFC, ITC, ICICI Bank, Infosys Technologies, L&T, ONGC, Reliance Industries, Ranbaxy Laboratories, Reliance Energy, Satyam Computers, State Bank of India, Tata Steel, Wipro and Zee Telefilms.

Amongst the stocks that declined were Bajaj Auto, Cipla, Gujarat Ambuja Cements, Hero Honda Motors, Maruti Udyog and Tata Power. Other Auto sector stocks that were seen lower were TVS Motor Company, Mahindra & Mahindra and Ashok Leyland.

Amongst the other steel and metals stocks that gained during Wednesday's session were Jindal Iron & Steel Company, Jindal Vijayanagar Steel, Sesa Goa, SAIL, Sterlite Industries, Saw Pipes and Hindalco. The other IT stocks that went up included TCS, MphasiS BFL, Polaris Labs, Patni Computers, Moser Baer, HCL Technologies and i-flex Solutions.