Sensex not out of steam above 7,000

Broad-based rally takes market to 7,076 points.

Led by a rally in index heavyweights Reliance Industries and Oil and Natural Gas Corporation, the 30-share Bombay Stock Exchange index scaled the 7,000-point peak today and stayed put there to close at 7,076.52, for the first time in its 130-year history.

The 50-scrip National Stock Exchange index too closed at a historic high of 2,170 points.

Against the overall perception that the markets might correct after breaching the 7,000 mark yesterday, the Sensex touched an intra-day high of 7,083.58, gaining 98 points.

The rally was broad-based, triggered by Reliance, ONGC and news of the good progress of the monsoon. Reliance Industries, the second-biggest constituent of the index, rose 2.46 per cent to close at a new high of Rs 645.90 and ONGC 2.5 per cent to close at Rs 944.95.

The market capitalisation of BSE today rose to Rs 18,20,000 crore but was still below its all-time high of Rs 18,31,000 crore recorded on June 15.

Despite the rally, losers continued to outnumber gainers by a wide margin for the third successive day today with 1,134 stocks advancing and 1,358 stocks declining.

However, among the 30 share Sensex basket, there were more gainers than losers. Against yesterday's ratio of 14:16, today 24 stocks ended in positive territory while six scrips ended lower. The volumes were moderate with both the exchanges accounting for Rs 8190.91 crore trading.

ONGC, HLL, Cipla, Gujarat Ambuja and ICICI Bank pushed the Sensex to a new high, forcing traders who were short in the futures and options (F&O) segment to square off their position, brokers said.

Deven Choksey, managing director, K R Choksey Securities, said: "If the Sensex sustains the current level, it may head towards 7,200. Smart money is chasing large cap stocks and amid intermediate corrections the frontline stocks will drive the market up."

However, Ved Prakash Chaturvedi, managing director, Tata Mutual Fund, cautioned investors saying there could be a correction as rising crude oil prices could come into play now.

Mukesh Ambani's companies were in the limelight today with Reliance Industries rising 2.46 per cent and IPCL ending about 1 per cent higher at Rs 169.10.

The Reliance Energy scrip ended marginally lower at Rs 655.30 and Reliance Capital lost 1.61 per cent lower at Rs 289.45.

The big gainers were Cipla (up 7.08 per cent to Rs 304.75), Gujarat Ambuja (up 5.99 per cent to Rs 62.85), ICICI Bank (up 3.3 per cent to Rs 418.45), HLL (up 3 per cent to Rs 152.60), Maruti Udyog (up 2.58 per cent to Rs 453.75) and Tata Steel (up 2.54 per cent to Rs 357.25).

The BSE mid-cap index recovered today after a sharp correction in the last three trading sessions. Both the BSE mid-cap and small cap indices were up 0.6 per cent today.

The biggest gainer among the indices was the BSE Bankex, up 1.57 per cent to 3,954.87.

Among the bank stocks, Centurion Bank was up 4.54 per cent to Rs 15.89, South Indian Bank 3.86 per cent to Rs 57.85, Union Bank 2.32 per cent to Rs 106 and Allahabad Bank 1.95 per cent at Rs 86.15.

The top gainers in the BSE FMCG Index were Godrej India (up 6.46 per cent to Rs 218.45), Nirma (up 3.43 per cent to Rs 405.55), and Rayban Sun Opticals up 1.84 per cent to Rs 74.65.

The foreign institutional investors (FIIs) were net buyers of Indian shares worth Rs 461 crore on Monday, their highest single day net inflow since March 28. The domestic mutual funds, however, were net sellers to the tune of Rs 228 crore.

Explaining the rally
STRENGTHS

Sensex company earnings expected to grow 23 per cent in 2005-06

Sensex trailing P/E at 15.17

Domestic mutual funds collections are buoyant; FII flows strong

WEAKNESSES

Mid-cap valuations appear to be stretched

Market breadth indicators are bearish

Nifty futures trading at a discount to cash

OPPORTUNITIES

Possible Chinese slowdown could mean diversion of some regional flows to India

Valuations are higher in other Asian economies Threats

Inflationary pressure from rising oil prices

Commodity prices could fall further if China slows down