Wondering why Sensex is huffing and puffing on the way back to 12,000, here’s an answer: not everyone’s pulling in the same direction.
MUMBAI: If you are wondering why the Sensex is huffing and puffing on the way back to 12,000 and beyond, here’s one answer: not everyone’s pulling in the same direction. Most of the horsepower is coming from Reliance and a handful of information technology and cement companies.
If one were to compare the prices of Sensex stocks now and at the time when the index was around the same levels the last time, most are now quoting at a discount. For the record, 18 of the 30 are.
Worry lines are apparent on analysts’ foreheads. “The markets seem to be rising with no depth,” says Sunil Jain, analyst at Edelweiss Securities. Volumes and open interest build-up in derivatives have also been low as compared to the not-so-distant past when the markets were near the 12,000 mark.
Wednesday saw the Sensex close at 11,933.21, a gain of 28.61 points (0.24%) over its previous close, while the May 16 close was 11,873.73.
Pushing up the Sensex now are Infosys Technologies, Satyam Computers and Reliance Industries, the stocks of which closed at a premium of 16.64%, 9.05% and 9.01% compared to their prices on May 16, 2006, the last time the Sensex ended around its close on Wednesday.
Incidentally, Reliance Industries and Infosys Technologies are also assigned the highest weightage in the Sensex pack.
Cement companies like Gujarat Ambuja Cements, Grasim Industries and Associated Cement Companies are others who have provided support to the benchmark index, quoting at premiums of 7.46%, 5.67% and 4.03% respectively compared to their prices on May 16, 2006.
Bharti Airtel was the lone ranger from the telecom space that stood tall in the Sensex pack, closing at a premium of 5.95%. The premiums of the other half a dozen shares that are quoting higher than their May 16 levels are nothing much to write home about. (See table).
In open interest also, the dip is marginally lower if one compares it to the levels as on April 28, 2006. It works out to 34.5%.
If one were to compare stock prices now to their levels on April 28, 2006, when the Sensex was again close to the 12,000 mark on its way to its all-time peak, the main drivers were more or less the same: Infosys Technologies, Reliance Industries and Satyam Computers closed at a premium of 17.01%, 12.85%% and 8.55% respectively, compared to their prices on April 28, 2006. But banking stocks have done better than this time relative to April. Overall, 17 of the Sensex stocks are down relative to April 28.
Meanwhile, open interest in the futures market at the close of trading hours on Wednesday stood at Rs 24,467 crore, 38.9% lower than the Rs 40,094 crore as on May 16, 2006. In fact, market volumes have also been hit badly. The average daily turnover (cash and derivatives market) on both BSE and NSE, from August 1, 2006, to September 6, 2006, has been Rs 29,655 crore, 44% less than the Rs 53,309 crore that was seen between April 1 and May 10, 2006 (the day the Sensex peaked).
Be that as it is, analysts feel that speculators and retail investors have largely stayed away from the markets as they don’t seem to be convinced the rise will sustain.
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