The Hindu Business Line : Nifty beats Sensex to a record high; closes at 4260 pts

Sentiment was buoyant in the stock market on Monday as the indices rose sharply and the Nifty raced ahead to a new all-time high closing at 4260 points for the day.

Though the Sensex rose 115 points, its close of 14,418 was still way below its all-time high of 14,723. In the process, the Nifty stole a march over the Sensex as the latter has always led the Nifty in setting new highs.

During the recovery in the second half of 2004, the Nifty reached its record high two weeks after the Sensex did.Again, in 2006 the Nifty followed the Sensex two weeks late in reaching a new record high. Shallower falls such as the ones witnessed in March and October 2005 had both the indices moving neck to neck.

Why the deviation now?

The reason for the Nifty leading the Sensex now is explained by the price movements in just three stocks that have the highest weights in the Nifty — Reliance Industries, ONGC and Bharti Airtel. Since March, RIL has gained 38 per cent, ONGC 23 per cent and Bharti Airtel 18 per cent.

The last two named stocks have a lower weight in the Sensex and hence could not influence the index.

That the stock with the second highest weight in the Sensex — Infosys Technologies — has been an underperformer in the last three months is another reason for the drag on the popular barometer.Another factor that worked in the Nifty's favour was the popularity of the futures market for the index; the Sensex futures market is yet to catch fancy. Traders could have resorted to index management tactics on the Nifty stocks to indirectly influence the index's futures price.Investment by India-dedicated funds into stocks in the Nifty basket could be another reason for the index racing ahead of the Sensex.

The sector that has led the Nifty to the new record high has been oil and gas. Capital goods and banking have been the other drivers of this rally.

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