Sensex tops 4,000, short correction seen

<div class="section1"><div class="Normal">MUMBAI: India''s most widely tracked equity marker broke through 4,000 points for the first time in 29 months early on Tuesday as investors bought stocks in anticipation of improved economic growth this year.<br /><br />But traders were divided over the near-term direction, with some expecting a brief correction before the rally picks up steam.There was broad consensus the longer term outlook was positive.<br /><br />At 10:58 am, the Bombay Stock Exchange''s top-30 benchmark index was up 0.70 per cent at 4,005.41 points.<br /><br />Market strength was positive with 799 gainers to 634 losers in heavy volume of some 143 million shares in the first hour of trade. <br /><br />Volumes looked set to hit a new high for 2003, beating Monday''s 283 million shares.<br /><br />"I expect the index to touch 5,000 in the next 12 to 15 months," said Ketan Jhaveri, a director at DH Securities.<br /><br />"Growth prospects are good, foreign inflows are strong and broad market sentiment is upbeat," he said.<br /><br />The BSE index has risen about 36 per cent in less than four months from a six-month closing low in late April and is up nearly 18 per cent in 2003.<br /><br />Share prices have rallied strongly in the past three months on expectations bountiful rains this year after a drought last year would boost growth in the agriculture-driven economy.<br /><br />Most forecasts, from independent observers as well as the government and central bank, peg growth in Asia''s third-largest economy at a minimum of 6 per cent in the current year which started in April, compared to 4.3 per cent a last year.<br /><br />Those expectations have led to a sharp surge in foreign fund inflows into stocks, totalling about $1.5 billion since May, or more than double the $740 million invested in the whole of 2002. "The domestic economy is very strong and resurgent, the bull phase will continue." said Sindhu Sameer, vice-president for institutional sales at Batlivala & Karani Securities.<br /><br />"Qualitatively the rally is much better than the one in 1999 which was skewed in favour of technology," he said.<br /><br />The National Stock Exchange''s broader 50-issue index is up nearly 39 per cent since the start of May.<br /><br /><span style="" font-weight:="" bold="">Low-priced stocks in focus</span><br /><br />Traders said volumes were heavy as retail investors were flocking to "penny" stocks, or shares which are low-priced.<br /><br />Of the 30 most-actively traded shares in the first hour, only two were from the benchmark Bombay index and as many as eight were priced below 10 rupees ($0.20).<br /><br />India''s largest steelmaker, Steel Authority of India Ltd, was down 7.5 per cent at 47.60 rupees as traders booked profits after a sizzling 30 per cent jump last session. It was the most actively traded stock on the BSE, with nearly 30 million shares.<br /><br />Among index stocks, Reliance Industries Ltd, India''s largest petrochemicals maker and a refiner, was up 1.93 per cent at 367.95 rupees.<br /><br />Hindustan Lever, India''s biggest consumer products maker, was up 1.73 per cent at Rs 185 while Housing Development Finance, the largest mortgage finance firm, was up 3.33 per cent at Rs 495.25.<br /><br />These three firms have a weightage of around 32 per cent in the BSE index.<br /><br /><span style="" font-weight:="" bold="">Outlook</span><br /><br />"People have been talking of a correction from 3,600 onwards but that has not happened. Maybe it will happen now that everyone is jumping onto the bandwagon...retail money is flooding into penny stocks," Jhaveri said.<br /><br />Other traders expected the market to either correct or consolidate before resuming its move up.<br /><br />"There should be a mid-session correction around 4,030-4,040 as prices have moved up too fast in the past couple of months," said Ramesh Damani, a member-broker of the BSE.<br /><br />Traders said the breadth of the rally was a good sign which showed that underlying sentiment was strong.<br /><br />"In the current rally I can name at least five hot sectors -- steel, cement, textiles, auto ancillaries and pharmaceuticals," Sameer said. "Of these except cement, all others are very good outsourcing stories as well."</div> </div>