Mumbai, July 22: Markets, already in the stratosphere, gave P. Chidambaram a new high as he marvelled at the way the sensex glided into a new orbit above 7400.
On a visit to the country’s commercial capital, the finance minister joked the surge “had something to do with his arrival”. He may or may not have caused it, but he could not miss the excitement as the index tested 7428.07 points an hour before the close of official trading. At 7423.25, the sensex gained 119 points, its sharpest single-session leap since the 144-point spurt on February 28.
The finance minister, however, called for caution, asking investors not to get “overexcited” about the booming stock market. Speaking at a tax seminar, he said the indices were reflecting “a measured response to the current potential and performance of the economy.
“Investors should not get carried away. The markets will rise and fall. We urge all to respond in a measured way and not to show undue exuberance. All participants in the market have to play a responsible role,” he said.
Among the many reasons for the surge was Thursday’s yuan revaluation, which has fired hopes of an export bounty for several industries competing against Chinese merchandise and services in the world market.
The currency windfall is expected to be huge for textile firms, which often battle Chinese rivals abroad. Some dealers, however, felt it was too early for celebrations. They argued that the rejig is too little and does not show the way to more such adjustments from China.
The debate could go on, but the sensex has risen two fold since July 2003. The pace has picked up as foreign investors eager to tap into the country’s 7 per cent growth pumped $6 billion (Rs 25,800 crore) into stocks compared with $8.5 billion (Rs 36,500 crore) in all of 2004.
The markets were moving in a narrow range and trading was flat until late in the afternoon, when a burst of confidence in blue-chips lifted shares across the board. One of the triggers was Reliance Industries, the index heavyweight that announced a board meeting to consider a proposal to call off buybacks. At the height of the ownership crisis, the company had planned a buyback to support its share price. “ In many ways, it shows a new confidence,” an analyst tracking the firm said.
Infosys, Reliance, Satyam Computers, ONGC, ITC, Tata Iron and State Bank of India also fuelled the sensex surge. But the surprise star of this afternoon’s trading was Bharat Heavy Electricals, whose shares shot up Rs 54.55 at Rs 995. This was a company that recently received a drubbing on the trading floor when the Left parties stonewalled divestment in the state-run company.
Reliance Industries jumped Rs 11.30 to end at Rs 690.05, while Infosys zoomed Rs 31.85 at Rs 2,242.
The rupee, having surged to six-year peaks against the dollar on Thursday, lost ground and closed sharply lower at 43.48. It tested another high of 43.15 earlier in the day, but the gains were wiped away in some heavy dollar-buying intervention by the RBI.
The RBI intervened through a consortium of large state-run banks, buying dollars at regular intervals even as the interbank foreign exchange market digested the revaluation of the Chinese currency, dealers said.