Growth numbers, oil deregulation buzz cheer market

A higher-than-expected gross domestic product (GDP) growth, coupled with talk of pricing freedom for oil marketing companies (OMCs), helped the Bombay Stock Exchange Sensitive Index, the Sensex, close in the green for the twelfth consecutive week.

Earlier, the US markets closed up, with energy stocks gaining due to rise in crude oil prices. Both the Dow Jones and the Nasdaq closed 1 per cent up.

Even the Asian markets closed positive today. The Hang Seng and Nikkei gained 1.5 per and 1 per cent, respectively.
 

THE 12-WEEK BULL RUN
Index	6-Mar	29-May	% Change
Sensex	8,325.82	14,625.25	75.66
Realty	1,346.83	3,819.89	183.62
Metal	4,525.06	10,878.42	140.40
Bankex	3,737.09	8,258.43	120.09
Source: BSE

The market was enthused by the fact that despite the global slowdown, India managed 6.7 per cent GDP growth in 2008-09. Also, pricing freedom to oil marketing companies, if allowed, would shore up the balance sheets of the government-owned oil marketing companies. Private players such as Reliance Industries would also find the fuel retail business more profitable if this happens.

The Sensex added 329.24 points, or 2.3 per cent, to close at 14,625.25. This made it its best monthly performance in 17 years. The S&P CNX Nifty rose 2.6 per cent to 4,448.95.

“While the GDP data only came as a feel-good factor, sentiments were more positive on announcement of a market-driven pricing regime for OMCs,” said VK Sharma, head (research), Anagram Stock Broking.

The market breadth was positive, with 2,147 stocks advancing, as against 649 declines on the Bombay Stock Exchange (BSE).

The realty index was the biggest gainer with a rise of 6.76 per cent, followed by the oil & gas index, which was up 3.31 per cent. In the recent bull run that started on March 9, the realty index has risen a whopping 183.62 per cent. ACC, DLF and Jaiprakash Associates jumped over 8 per cent in today’s trading. TCS, Tata Steel and M&M were up 5 per cent. ONGC rose 4 per cent.

Market experts, however, say that though domestic cues are driving the market at present, inflows from foreign institutional investors (FIIs) will be a key factor in the future.

“Insurance companies and mutual funds were booking profits at these levels, therefore FII inflows will become the key factor. The realty sector may continue to rally, as it has traditionally been attractive for FIIs,” said Deepak Jasani, head (retail research), HDFC Securities.

However, there is a word of caution from experts. “Indian markets may have overreacted to the positive news flowing in over the last few weeks. With the 10-year bond yields rising to their monthly highs, banks may not find any room to reduce interest rates further. This could adversely impact interest rate sensitive sectors,” said Jasani.