Sensex shuts at a new 2009 high!

Thu, 24 Dec Closing

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After spending most part of the day near the breakeven, a strong burst of buying activity towards the latter half of the day saw the benchmark indices end strongly in the positive on yet another occasion. While the Sensex closed higher by around 130 points (up 0.8%), Nifty ended with gains of around 35 points (up 0.7%). BSE Midcap and Smallcap indices also witnessed strong buying activity today, closing higher by 0.7% and 0.6% respectively. Only one stock declined on the Sensex for every five that gained.

As far as other global indices are concerned, while those in Asia mostly ended on a strong note, most of Europe is also trading buoyant currently. The rupee was trading at Rs 46.7 to the dollar at the time of writing.

The jinx finally seems to have been broken. The Sensex has finally managed to go past its previous highest closing of the year. Something it had been trying in vain for more than two months now. Frankly speaking, until a couple of days back, very few people would have seen this coming. After all, days when the Sensex scales nearly 700 points in two days flat are very rare indeed.

And it wasn't just greater liquidity that was driving the index. Investors seemed to be enthused with the announcement by India's Finance Minister that the economy could end the year with a growth rate of 8%, an upgrade of important magnitude from the earlier projection of 7% or thereabouts. Furthermore, worries that RBI would hike interest rates have also died down a bit after assurances from the government that food prices, the main reason RBI was contemplating hiking rates, would start easing from January 2010 onwards. However, if inflation in other items also starts getting out of hand, then the RBI may have to step in and this in effect, poses one of the biggest risks to the current rally. Hence, investors need to be cautious to that extent.

It was not just the Sensex that had a brush with its yearly highs. A lot of its constituents were also in contention. Tata Steel is a case in point. The company closed higher by 2% on the bourses today, also its yearly high. The optimism towards the counter stems from higher profit expectations not just in India but also its Europe based subsidiary Corus. It should be noted that there was an announcement from the company's top management that the company is considering price hikes in the domestic market, which would obviously give a boost to its profitability. Besides, with some signs of recovery being seen in US and other developed markets, Corus is also expected to turn in a better performance in the near future. Furthermore, with Corus being a highly leveraged operation both operationally as well as financially, even a small improvement in pricing and volumes will have a big impact on the profitability of the consolidated entity. Little wonder, investors seem to be warming up to the counter quite strongly.

Telecom heavyweights Bharti and Reliance Comm. were amongst the few losers on the Sensex today. And the reasons were not hard to find. Investors were already nervous about falling ARPUs in the sector but now looks like the pace of growth in subscriber additions for these companies is also under fresh attack from rivals. It has so emerged that Tata Teleservices Ltd, which was the first in the country to introduce per second billing has emerged as the top operator in the country in terms of new subscriber additions for the fourth consecutive month. As per a leading daily, by adding 3.3 m subscribers in the month of November, the company has beaten both Bharti as well as Reliance, who managed to add 2.8 m subscribers each. Clearly, the top two players have some hard thinking to do.