Sensex too rallies

MUMBAI, JAN 19: Share prices rallied on the back of a strengthening rupee and a fresh rally in the Asian markets on Monday. The 30-share BSE...

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MUMBAI, JAN 19: Share prices rallied on the back of a strengthening rupee and a fresh rally in the Asian markets on Monday. The 30-share BSE Sensitive Index breached the psychological barrier of 3,400 points to close at 3,480.86, showing a gain of 98.54 points.

Brokers said the changes made by the Reserve Bank in the monetary policy helped the rupee gain ground and touch a high of Rs 39 against the dollar, which in turn triggered the rally on the bourses. Shares also flared up on rumors that FIIs would start buying in the market this week.

Analysts said that in light of the fair amount of short positions in the market, especially at counters like SBI and Reliance, and the upward trend in the GDR market, share prices were expected to move up. With fresh FII buying allowed at the counters of SBI and HDFC, local punters were seen building huge long positions at these counters in anticipation of buying by FIIs.

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About 1.05 crore shares changed hands at the SBI counter on the BSE. On the NSE, the stock recorded a volume of over 1 crore shares priced at Rs 258.20. “The day’s session gave a perfect picture of the shift in focus of speculators from counters like ITC and Castrol to SBI and Reliance, which is evident from the sharp rise in their volumes,” commented a dealer at an FII brokerage firm.

“With the focus of the market shifting to realise the benefits the RBI package has in store especially for the power and banking sector stocks, local speculators rushed in to make fresh positions,” commented a senior BSE broker. “Moreover it has been a rule that the market moves in contradiction to a general consensus, which was just another case we saw at the day’s session” he added.

Research analysts maintained that as the prime lending rates are directly linked to the returns earned by the power companies, net of tax, every increase in the PLR would see a positive growth in the earnings of these companies. The rise in the bank rates was also cited as one of the prominent reasons for the renewed buying interest at the power counters.

BSES gained Rs 14 to close at Rs 174 on the NSE after touching an intra-day high of Rs 175. Similarly, Tata Power moved up to touch an intra-day high of Rs 117 before closing at Rs 115, up Rs 4.50. Meanwhile, the response of foreign institutional investors (FIIs) to the lifting of the ceiling on their secondary market purchases at the State Bank of India (SBI) and HDFC counters was lukewarm on Monday, the first working day after the RBI announcement.

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There were no more than two or three purchase applications from FIIs at these counters, sources said.