Be­fore Swear­ing-in, D-St, Swear by Modi

Small- and mid-caps lead rally and Sen­sex, Nifty scale new peaks; Re at 11-month high

The Economic Times - - Front Page - OUR BUREAU

Small- and mid-cap shares led the buy­ing frenzy on Dalal Street on Mon­day as ris­ing hopes that the new govern­ment would re­pair the econ­omy prompted in­vestors to lap up stocks that were avail­able cheap. The Bom­bay Stock Ex­change’s small- and mid-cap in­dices posted their big­gest sin­gle-day gains in five years, steal­ing the lime­light from bench­mark in­dices which closed at all-time highs. The ru­pee rose to an 11-month high against the dol­lar as for­eign in­vestors pumped money into the lo­cal mar­ket. As many as 532 of 2,859 stocks traded on the BSE were frozen at the max­i­mum trad­able limit of the day. Buy or­ders in ex­cess of 50,000 were pend­ing in many stocks in the ab­sence of sell­ers. Bro­kers and an­a­lysts ex­pect the rush to pur­chase these stocks to con­tinue for a while, at least un­til their val­u­a­tions catch up with those of large-caps. “Mon­day’s sit­u­a­tion is not sur- pris­ing. Ei­ther you buy cheap or wait for the good news and buy stocks ex­pen­sive,” said Ramesh Damani, a vet­eran BSE bro­ker. “Stocks in small, mid-cap counters mov­ing from cir­cuit to cir­cuit may con­tinue for some time.”

BSE’s small-cap in­dex soared 5.8% and mid-cap gauge rose 4.2%, their high­est daily gain since May 19, 2009. Jaiprakash Power shot up 30% while KSK En­ergy, MMTC and In­di­a­b­ulls Power were among those hit­ting the 20% cir­cuit. Many of these stocks were in power, in­fra­struc­ture and con­struc­tion sec­tors, which in­vestors feel would ben­e­fit un­der the in­com­ing Modi govern­ment. “In­vestors were wary of buy­ing many of these ahead of poll re­sults when they were avail­able dirt cheap,” said Damani. The Sen­sex gained 1%, or 241 points, to close at 24,363.

On the Na­tional Stock Ex­change, the CNX Nifty rose 0.84%, or 60.55 points, to 7,263. Bench­mark in­dices were weighed by sell­ing in tech­nol­ogy and pharma stocks. The BSE IT in­dex, which fell 5%, touched a seven-month low on Mon­day as the ru­pee’s gain will hurt tech­nol­ogy firms that get most of their rev­enue from ex­ports. On year-to-date, mid- and small-cap in­dices have gained 21% and 27%, re­spec­tively, out­per­form­ing the Sen­sex that rose 15% this year so far. Damani said the poll re­sults would bring back re­tail in­vestors with a bang and even re­vive the pri­mary mar­ket for eq­ui­ties. Re­tail in­vestor par­tic­i­pa­tion in the do­mes­tic mar­ket was at a decade-low as sav­ings moved to gold and real es­tate. “We strongly be­lieve that the elec­tion re­sults will mark the re­vival of re­tail in­vestor in­ter­est in eq­ui­ties,” said Ab­hay Lai­jawala, man­ag­ing di­rec­tor and head of re­search at Deutsche Eq­ui­ties In­dia. “Re­tail in­vestors are ex­pected to shift their in­vest­ments from gold and other such non-pro­duc­tive as­sets to eq­ui­ties.” The ru­pee on Mon­day closed at 58.60 to the dol­lar, up 18 paise from Fri­day af­ter hit­ting an in­tra-day high of 58.38. For­eign in­sti­tu­tional in­vestors bought stocks worth Rs 1,350 crore dur­ing the day, ini­tial ex­change data showed. Some na­tion­alised banks were seen buy­ing dol­lars be­low the 58.50 level, which some deal­ers termed as sus­pected cen­tral bank in­ter­ven­tion to stem the ru­pee’s sharp ap­pre­ci­a­tion. Ris­ing for­eign ex­change re­serves at the Re­serve Bank of In­dia in­di­cate its dol­lar-buy­ing, deal­ers said. Cen­tral bank data last Fri­day showed the re­serves at $313.8 bil­lion, com­pared with about $311 bil­lion a week ear­lier. The lo­cal cur­rency’s gain is not good news for ex­porters, as they get fewer ru­pees for the dol­lar they bring in. “Ex­porters are fac­ing a dou­ble­whammy ef­fect, that is los­ing in spot as well as the for­ward pre­mium,” said Niki Mistry, se­nior re­search an­a­lyst at In­dia Forex Ad­vi­sors. “Ex­porters are go­ing for short-term cov­ers to safe­guard their bench­mark cost­ing. We are sug­gest­ing ex­porters to ini­ti­ate a blend of short­term and long-term for­ward con­tacts with ap­pro­pri­ate hedge ra­tio.” Bond prices moved lower, buck­ing the trend of mar­ket ral­lies on po­lit­i­cal op­ti­mism, with the yield on the 10-year bench­mark paper clos­ing at 8.87%, up four ba­sis points from Fri­day. Bond price and yield move in op­po­site di­rec­tions. A troika of rea­sons, in­clud­ing the fear of higher fis­cal deficit num­bers in the next budget, ex­cess bond sup­plies and profit-tak­ing hurt bond prices, deal­ers said.

With the ru­pee on the rise, the BSE IT in­dex fell 5% and touched a seven-month low

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