Itc Leads Sensex Surge

For instance, HLL, which has a weightage of more than 10 per cent in the Sensex, has risen by 20 per cent during this period. ITC, another heavyweight, has recorded a gain of 24 per cent. While pivotals like Hindustan Petroleum, L&T and Glaxo have overperformed the Sensex, the market's favoured speculative stock, Reliance, has moved up with the Sensex with a 9 per cent jump.

On the other hand, a large number of Sensex-based stocks having a lower weightage have underperformed the market. Of the 30 Sensex stocks, seven have overperformed the Sensex, 20 have underperformed, and the remaining three performing close to the market. This suggests that the Sensex has moved up mainly because of a sharp rise in share prices of select scrips.

 

In each of the three scrips, ITC, RIL and HLL, there have been specific reasons driving the rally.

While the ITC buying spree has been triggered by continuous backwardation charges coupled with huge auctions on the NSE, short-sellers rushed to cover up their positions thereby giving momentum to the rally.

Reliance has evinced strong buying interest based on the market expectations of a bonus. The Reliance annual general meeting is due on June 26, and the market is expecting the company to announce a bonus issue ahead of the meeting.

The HLL scrip has reacted positively to the compromise deal with RBI which, sources say, amounts to recognition of minority shareholders rights.

Market men say the Sensex had a major resistance level at around 3800-3900 not because of technical factors but because institutional selling emerged at these levels. Even in the last two weeks, the Sensex has hovered around these levels before retracting. However, once it became clear that the institutions were not selling, the market turned bullish enough to cross the 4000 level.

FII sources, however, justify their stand noting that the worst is behind India Inc. Most company results for the last year are already in. From now on, the market have to start looking at prospective 1998 earnings, they say, noting that this year should see a reversal in corporate fortunes. Sources at NatWest Markets said the economic turnaround is "almost happening," and this could possibly be the trigger point for the markets.

The fact that a petro price hike is inevitable has already been factored into market expectations. FII sources said, any action could only send a positive signal that the government is putting its act together after the cabinet reshuffle.

As regards what could spoil the party, FII sources said barring political upheavals in the Janata Dal, and thereby the United Front, the political scene is cool. The Congress organisational elections have been completed with rancour but without any untoward developments, and this bodes well for political stability in the party.