The Telegraph
Since 1st March, 1999
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' scaling peaks on the stock market

Mumbai, Feb. 14: Stocks have started to sizzle again ' and as the sensex prepares to make an assault on Point 7000, punters are betting heavily that reform-minded finance minister P. Chidambaram will put together an investor-friendly budget later this month.

On Monday, the Bombay Stock Exchange sensitive index scaled a historic summit of 6700 ' briefly touching 6719.17 ' before investors scooped up gains, sending it down to 6679.33 points at close.

The big question: does the pre-budget rally have the ballast to blast past the magic figure of 7000'

Market players remain bullish. 'The undertone is very strong,' said A. Shashikant, manager, equities, at Brics Securities. Shashikant reckons that it isn't important to scale the peak on February 28 itself ' the day of the budget ' and the market will be pleased if it holds around 6800 to 6900.

Even as the sensex traipsed new ground, there was some cause for worry as the broad market trend saw more losers than gainers ' 1225 stocks dipped, 870 rose.

Investment bankers are sure calendar 2005 will be a lot more prosperous than the previous year as the capital market will continue to buzz with new issues and an expected surge in corporate mergers and acquisitions (M&As) will serve to accentuate the prevailing optimism. Companies are expected to raise Rs 40,000 crore through public issues.

Initial public offerings generated over Rs 30,500 crore in 2004, the highest in the history of the capital market. Rajeev Gupta, joint managing director, DSP Merrill Lynch, reckons that the two main products of investment banks (public offerings and M&As) are in a growth phase.

'The equity capital market is buoyant and willing to provide large amounts of capital to companies. In turn, companies have the confidence and plans to absorb the capital being offered. M&A transactions are being driven by the continued quest for strength from narrow but deeper business portfolios by conglomerates and the growing interest shown by foreign investors,' he told The Telegraph.

The Cassandras say that the action in the new issues market could nix the rally in the stock market as money that would normally have gone into the bourses will now go into the flotations.

But many disagree, arguing that the boom story will remain intact because of the quality of flotations and the sustained interest in the Indian market from foreign investors with deep pockets.

Gupta said the big difference this year is that companies have started nursing big ambitions to grow their businesses. Many of them are looking to grow through buyouts and acquisitions. 'The gainers from this trend will be the global investment banks,' he added.

Other investment bankers who concur with Gupta that 2005 will be a lot better point out that the trend has already begun. Swiss cement maker Holcim 'the world's second-largest cement maker ' has formed a strategic alliance with Gujarat Ambuja Cement, to name just one.

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