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Moody markets

Nov 23, 2002

It was another positive week on the bourses. Having been in hibernation since Febrauary '02, the bulls seem to be making their presence felt. The BSE Sensex gained more than a hundred points. Over the past fortnight the benchmark indices, Sensex and Nifty, have gained 6.6% and 6.9% respectively. Expectations from the winter session and anticipated budget proposals could be generating interest. Evaluating the markets top-down, the environment has changed considerably for the better. Global equities staged a rally over the past fornight, which could have emboldend domestic bulls. Over the concerned period, Nasdaq has outperformed other leading global lindices rising by 11.3%. The performance seems to offer an explanation for rally in the domestic tech sector. Global equities, led by U.S, are likely to have received respite with Iraq agreeing to U.N resolution for arm inspection. This is likely to have reduced war fears among investors. Easing of the impasse has led to a salubrious effect on oil markets with Brent blend trading at $24.7/ barrel -- down approximately 18%.

FDI committee chairman, N.K. Singh, has gone on record to state that among the key result arears for the country is passing second generation reform legislation. It seems, cognisant of the imperative, the parliament passed the first fresh legislation 'Securitisation and Reconstruction of Financial Assets and Enforcement of Security Bill, 2002'. Reportedly, the centre and state have reached a consensus on value added tax and transition to the new system is likely to commence from April 1, 2003. Therefore, while the privatisation agenda has been sidelined -- one hopes -- temporarily, the Government seems to be making efforts to not let its overall grades drop. After a slip in September '02, the economy has regained momentum with reports indicating the core sector (mining, electricity, oil production, oil refining, cement & steel) registering 6.1% YoY growth.

Reflecting a strengthening economy, Corporate India reported a better than expected second quarter performance. With domestic markets sliding near to decade lows in October '02, the risk-reward was favourable. With absence of a particular story, investors are likely to have taken re-evaluated the fundmentals leading to interest in blue-chip stocks. Markets, being what they are, rallied to resistance levels of 3,150 on Friday. With winter session starting on a good note, one could expect more plesent news from North Block. Consequently, current resistance level is not likely to withstand the current charge.

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