Government wins market trust too

The markets cheered the government's victory in Parliament on hopes that reforms would get a push with the Bombay Stock Exchange's (BSE's) benchmark sensitive index (Sensex) gaining the most since March 25 this year to come within striking distance of the 15,000-mark.

But the happiness is likely to be shortlived as several market players feel that most of the fundamental factors in the Indian economy remain unchanged.

Yesterday's gain added over Rs 2,00,000 crore in market capitalisation. The Sensex gained 5.9 per cent, or 838 points, to 14,942.28, while the S&P CNX Nifty-50 gained 5.6 per cent to close at 4476.8 points.

The victory gives Prime Minister Manmohan Singh a mandate to increase overseas investment in insurers and lift curbs on voting rights in banks, which had been held up by his former Communist allies, according to Citigroup and Goldman Sachs.

The cheer in the markets was led by foreign institutional investors (FIIs) as they returned to the equity markets, buying equities worth Rs 1,306.56 crore, while domestic institutional investors sold equities worth Rs 875 crore, according to data from the BSE website.

Only two stocks among the index pack were in the red yesterday "" Cipla (down 2.21 per cent to Rs 232.5 a share) and Hindustan Unilever (down 0.65 per cent to Rs 231.05 a share). 
 

TOP 5  CONTRIBUTORS TO SENSEX CHANGE
	Jul 23, 2008	Change (in %)
ICICI Bank	738.25	11.64
Reliance Ind	2265.50	5.16
HDFC	2380.20	10.92
Larsen & Toubro	2766.65	7.58
SBI	1543.80	10.45

 

TOP 5 SENSEX GAINERS
	Jul 23,# 2008	Change* %
RCom	525.25	12.20
ICICI Bank	738.25	11.64
BHEL	1772.00	10.92
HDFC	2380.20	10.92
SBI	1543.80	10.45

 

TOP 5 BSE SECTORAL INDICES
	Jul 23, 2008	Change * %
BANKEX	7291.50	9.99
CG	12339.77	8.18
REALTY	5199.27	8.08
POWER	2707.11	7.74
METAL	13070.52	6.85

The market breadth improved with 2,270 stocks on the advancing side and 436 stocks on the declining side.

Nuclear power equipment makers rallied on speculation that Singh's victory would increase orders for turbines and generators used in reactors. Stocks such as Larsen & Toubro (up 7.58 per cent to Rs 2,766.65 a share) and BHEL were among the gainers on Wednesday.

Banking stocks were up with the BSE Bankex closing at 7,291.5 points, up nearly 10 per cent or 662 points, the highest gainer in yesterday's pack.

However, while most market participants have hailed the government's victory, brokers feel that little has changed where fundamental factors affecting the economy are concerned.

"The sentiment has improved. The confidence about reform going ahead is higher but the broader concerns about the economy have not subsided. The impact of falling crude oil prices is already factored in but until the economy numbers start improving, the markets will still be on a sticky wicket," said Jayprakash Sinha, head-institutional equities at local broking house Mangal Keshav Securities.

According to Lehman Brothers, despite the outcome of yesterday's vote, the current government's overall position remains weak.

"This morning's air of greater political certainty is therefore likely to prove short-lived, in our view, with greater uncertainty likely to return until the elections are done and dusted.

Once a new government takes office, there should be at least a new window of opportunity for economic reform, particularly if inflation eases next year, as we expect," its report said.