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17,000 SENSEX

RALLY WITH FOREING FUNDS

THE SENSEX crossed the 17,000-point mark the the Ambani brothers. Three companies held by Mukesh and Anil accounted for 792 points of the Sensex’s jump from 15,000 to 17,000. Of these three - Reliance Industries Ltd, Reliance Communications and Reliance Energy - the first, Mukesh’s flag ship company, has the highest index weightage of 14.47 per cent. In the last six sessions, Reliance Industries moved 18 per cent before slipping 3.4 per cent. "The brothers are trying to outdo each other in the market cap game," is the latest buzz on Dalal Street.

Positive news from the companies maintaining the momentum. The discovery of oil and gas reserves in the Cauvery Basin brought cheer at Mukesh’s end. Though one SMS from a trader said: "The market cap held by the two brothers makes me redefine PE to mean price -to –ego- ratio." Analysts expect more value-adds. If hiving off the cell phone towers business added value Reliance communications, the market expects the hiving off of the exploration and production business o have the same effect on Reliance industries.

Indian Stocks remained on their record-breaking run with the benchmark Sensex of the Bombay Stock Exchange breaching the 17,000 mark for the first time in its fastest 1,000- a point rally as foreign funds stepped up purchases of Indian equities. The 30-share index, however, failed to hold on to early gains and closed at 16,921.39, still up by 21.85points from its previous close, as investors booked profit.

The Sensex crossed the 17,000- a point level, covering the last 1,000 n points in just six trading sessions. It touched an intra-day high of a 17,073.87, and a low of 16,887.07 B points. The broader Nifty of the National Stock Exchange also closed higher by 1.65 points at 4,940.50, after touching a record high of 4,980.85 and day’s low of 4,930.35 points.

A steep fall in Reliance Industries, the country’s biggest firm by market value, mainly drove the Sensex down. The RIL scrip, which has a weightage of around 15 percent on the Sensex, fell after reports that the company may put on hold investment plans to expand its retail venture in Uttar Pradesh. The oil and gas index dropped 160.57 points at 9,616.94, followed by the realty index by 112.09 points at 8,973.38. The capital goods index lost 109.26 points at 14,654.35 and the auto index ended lower by 35 points at 5,215.27.

Major support for the market came in from the bankex, which rose 172.82 points at 9,117.80 as the IT and PSU indices also gained. Amid the euphoria in the markets, some analysts warned caution and said the markets should consolidate now. However, analysts have also said that both short-term and long-term outlook for the markets were strong as the economy is in good shape and second quarter results are expected to be robust.

The latest 1,000 point rally has been very fast. But markets should consolidate and settle down at these levels. One major factor behind the six sessions, 1,000-point sprint by the Sensex has been strong liquidity and short covering for the futures and options rollover, adding that investors should be ‘cautious in their investments after the Sensex’s climb to newer heights. "The 17,000 mark is a danger signal. This shows that something is not correct fundamentally. This dizzying level should be viewed with caution," one may hear this as well.

Terming the 17,000-point level as a psychological level, A Stock Brokers said, "it is a- better if the market consolidates for the time being. It should take a breather." Going forward, the markets could witness a correction of around 500 to 1,500 points from the present 17K level, analysts said, even as the long-term outlook remains bullish. Regarding Reliance Industries, which contributed significantly to the day’s rally driven s by its strong fundamentals, will always be the leader. The scrip has good operational capabilities.

The other main drivers were Bharti Airtel and ICICI Bank. All t these stocks offer good value and foreign investors want safety as well as gain for their investments. The speed with which the markets have gone up is because we are seeing a huge flow from foreign funds. India is one of the safest havens among the emerging markets. Analysts expect the Reserve Bank of India, which has repeatedly increased lending rates over year and a half, to eventually loosen its monetary policy. That speculation has lifted banking stocks and shares other companies whose sales are driven by lower lending rates.