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Old Economy stocks rise on enthusiasm over forthcoming budget
February 24, 2003 15:06 IST
An array of Old Economy stocks displayed strength in the first half of trading on Monday, lending a firm trend to market indices.
As a result, the benchmark 30-share Bombay Stock Exchange sensitive index spiraled up by 26 points to 3,333. The S&P CNX Nifty was up 7.40 points to 1,073.55.
Index heavyweights Reliance Industries (up 2% to Rs 301) and Hindustan Lever (up 1% to Rs 173) led the rally. However, other stocks in automobiles, banking, cement and power came good as well.
Among the gainers were BSES (up 2.8% to Rs 235), Gujarat Ambuja Cements (GACL) (up 1.6% to Rs 157.50), Telco (up 1.5% to Rs 163.75), Grasim Industries (up 1.5% to Rs 345), State Bank of India (up 1.1% to Rs 314.50), Tisco (up 1% to Rs 153.25) and Bhel (up 0.37% to Rs 215.70).
In non-Sensex stocks, gainers included Canara Bank (up 3.8% to Rs 69.85), Alstom Power (up 4% to Rs 66.10), Andhra Bank (up 5.7% to Rs 31.05), Tata Tea (up 2% to Rs 180.50), Eicher Motors (up 2.3% to Rs 83.45) and Mahindra & Mahindra (up 1.5% to Rs 107.10).
Dealers attributed Monday's rally to pre-budget optimism. There are expectations that the forthcoming Union Budget may be investor-friendly. Additionally, the reckoning that war may not after all take place, at least in the immediate future, prompted decent buying. The same reasons had effected a jump in the Sensex - up 83.79 points or or 2.59% to 3,307.20 - last week . The S&P CNX Nifty gained 30.15 points, or 2.9%, to close at 1,066.15 last week.
There's much anticipation that the government may abolish dividend tax (in investors' hands), which may boost the equity market. On the other hand, if such hopes are belied, the market may fall. There are also expectations that the government may scrap long-term capital gains tax on sale of shares.
According to chartists, the Sensex has a resistance at 3,330 (it is currently trading slightly above that level, at 3,333) and if it is able to decisively breach that level, there could be a further rally in the market. On the other hand, if that is not broken, the market may slip, chartists say.
Right now, the focus is on Old Economy stocks in sectors like power, automobiles, banking, fast moving consumer goods and petrochemicals.
For the auto sector, market men expect (from the budget) a reduction in excise duty on car and utility vehicles from the existing 32% to 24-27%. Buying is, therefore, taking place in sector leaders Telco and M&M. Power stocks like Bhel, BSES are in demand after the Union Cabinet on Wednesday cleared the Electricity Bill, which will be introduced in Parliament soon. The bill is expected to step up reforms in the power sector.
Among the long list of expectations of the banking sector from the forthcoming Union Budget are the
exemption of dividend tax completely - neither the bank nor the recipient to be taxed, higher tax break for provisioning of bad loans, sops for corporate debt restructuring in steel, textiles and chemicals etc. to reduce NPAs and increase in exposure limits to capital markets from 5% of incremental deposits to 8-10% to improve credit flow to capital of markets. More Hot Pursuits
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