Fii Buying Buoys Market Expectation Of Bull Phase

Market sources attribute the recent five to six per cent gain in stockmarket indices to speculative trading during the no-delivery period for key stocks, coupled with purchases by foreign institutional investors and marginal selling by the Unit Trust of India.

While the market may witness a reaction in the near term, the outlook is bullish in the long-term, say brokers.

FIIs have also stepped up their activities. While domestic instiutions are not so aggressive in their trading activity, brokers say new FIIs have entered the market and made purchases in key pivotals.

The BSE sensex opened the week yesterday at 4,043.20, and touched an intra-day high of 4,076.56 and a low of 4,006.80 before closing at 4,025.41, down 4.58 points from the previous close of 4029.99. The NSE-50 (Nifty) opened at 1,135.30, and touched an intra-day high of 1,141.05 and low of 1,121.85 before closing at 1,129.79, a a net loss of 6.60 points against the previous close of 1,136.30,

 

The BSE sensex gained 193.55 points (5.04 per cent) last week, moving up from 3,836.44 to 4,029.99. The Indian GDR market has also moved in tandem with the local markets, with the Skindia GDR index touching an 11-month high last week. The GDR premia currently stands at an all-time high of 30.61 per cent.

Says Gul Tekchandani of Sun F&C: The market has witnessed no-delivery period in key stocks. Speculative activity is on the rise due to the coming board meetings in Reliance and State Bank of India. Besides, the market has seen FII purchases worth $ 400 million in the past two months. The inflow is likely to be sustained in June as well.

SBI, Tata Tea, Bajaj Auto, ICICI, L&T, Escorts and Mahindra & Mahindra are among the key stocks which have entered the no-delivery period at the Bombay stock Exchange.

Brokers also point out that when new FIIs enter the market, they initially purchase key pivotals like Reliance, SBI and Tisco before extending their portfolio to other stocks.

Says R Venkatsubramanian of Kotak Securities: There are new FII buyers in the market. This can be seen by the demand witnessed for Telco and other auto stocks. The outlook for the sector has not been good.

However, newcomers generally prefer safe stocks like these to make a begining. We expect an investment to the tune of $ 250-300 milion during June as the Indian markets are attractive for investors abroad.