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The Rediff Business Special/The most monitored market in 1999

Stock-market: Bulls greet Y2K, catapult Sensex beyond 5K

Driven by political stability and first signs of revival in the Indian economy, major stocks indices posted unprecedented gains during 1999.

The 30-share Sensex of the Bombay Stock Exchange created history by surpassing the 5,000-point mark while the S&P CNX-Nifty Index too made a whopping gain during the year.

On January 1, 1999, the 30-scrip BSE Sensex ended at 3060.34 points, On December 30, it ended at 5005.80, up 1945.40 points or 63.56 per cent.

On January 1, the S&P CNX Nifty Index closed at 890.60 points. On December 30, it closed at 1480, up 589 points or 66.10 per cent.

This is the third time in the BSE's history that the Sensex recorded such a hefty gain during the calendar year and first time in the last seven years.

''After a long time, the country has seen a stable government at the Centre and the phase of uncertainity is over. Followed by this, the industrial performance too improved. Besides infotech, economy sectors such as cement, steel and automobiles performed well, pushing up the stock market continously during the year,'' said R H Patil, managing director, the National Stock Exchange.

Crediting the political stability for the wonderful performance of the stock market during the year, Patil said, ''After the Congress government lost in 1996, we saw a series of coalition governments in the absence of clear majority to any single party. And during the coalition regime, economic reforms slowed down. This had sent alarm signals through the secondary market.''

However, the present government speeded up the reforms. Clearance for the Derivatives and nsurance Bills within two months after the formation of the new National Democratic Alliance government sent positive signals to the foreign institutional investors as well as domestic investors.

Earlier in April, the ouster of the BJP government at the Centre by a single vote, followed by the Kargil conflict, had taken its toll on the stock markets.

But factors such as comfortable win for the Vajpayee-led NDA government in the last quarter of 1999, waiving of US sanctions on various items, unprecedented export growth in IT sector, Moody's outlook upgrade, listing of ADRs by Indian companies like Infosys at Nasdaq and by ICICI at New York Stock Exchange and the initiation of economic reforms are a few pointers to positive growth.

Spurt in industrial production to eight per cent and drop in the consumer index from 16 per cent to six per cent also fuelled the rally in the stock markets, which reflected in the phenomenal increase in the market capitalisation in both the BSE and NSE.

Also, the reduction in capital gains tax to ten per cent, the idea to give trading terminals to NRIs and freeing of tax in mutual fund dividend for three years as suggested by Finance Minister Yashwant Sinha were also welcomed wholeheartedly by marketmen.

The total market capitalisation at the BSE posted an increase of Rs 4.22 trillion to Rs 9.25 trillion against Rs 5.02 trillion while the business volume also registered an whopping increase of Rs 4.13 trillion at Rs 8.33 trillion during the calendar year 1999.

Diversified industrial giant Wipro's market capitalisation almost matched that of Hindustan Lever's (Rs 511.59 billion). Currently, the top three stocks ranked by market capitalisation are HLL, Wipro and Infosys Technologies on the BSE and NSE.

The Sensex surpassed the 5000-mark and created history on October 8 and touched an-all-time high of 5075.39 on October 14, 1999.

It was the third time in the history of the BSE that the Sensex recorded a 50 per cent gain. Earlier, in 1954, the Sensex closed at 527.36 points, about 255.49 points higher from the previous year's close.

All the major indices of the BSE and NSE ended substantially higher.

Riding on the IT wave, the world's major indices also registered a phenomenal increase during 1999. The Dow Jones Index shot up by 2,224.33 points at 11,405.76 points from the last year's close of 9,181.43 points, Nikkei skyrocketted by 5,260 points at 18,675 points from the last year's finish of 13,415.89 points, the Hang Seng advanced by 6,769.90 points to 16,833.28 points from 10,043.58 points, while Nasdaq Composite Index which also surpassed the 4,000-mark and closed at 3,969.44 points, at least 1,776 points higher from the previous close of 2,192.69 points.

In India, prominent gainers among the top 50 scrips at the NSE also created history in the capital market by recording unprecedented appreciation in the values.

Infosys Technologies topped the list of gainers of the year by registering a 327 per cent gain. The Infy scrip closed at Rs 12,700 from the previous year's close of Rs 2,968, followed by Ranbaxy which posted a 248.87 per cent gain to Rs 936.90 from Rs 268.55, Reliance Petroleum recorded a 234.39 per cent gain at Rs 63.2 from Rs 18.9, Reliance Industries 89.21 per cent at Rs 226.3 from Rs 119.6, Satyam Computer 171.48 per cent at Rs 1,975 from Rs 727.5, ICICI 99.79 per cent at Rs 94.1 from Rs 47.1, Hero Honda 93.68 per cent at Rs 1,052 from Rs 543.15, Dr Reddy's Labs 181.36 per cent at Rs 1,366 from Rs 485, HDFC Bank 194.79 per cent at Rs 161.1 from Rs 54.75 and NIIT 89.21 per cent at Rs 226.3 from Rs 119.6, IPCL 93.29 per cent at Rs 110.95 from Rs 57.4, Grasim 126 per cent at Rs 408 from Rs 180, Mahindra and Mahindra 137 per cent at Rs 391 from Rs 165.

Impressive gains were also made by Tata Tea (53 per cent), SBI (44 per cent), Novartis (53 per cent), TVS Suzuki (11 per cent), SmithKline Beecham (12 per cent), BSES (34 per cent), Cipla (61 per cent), Gujarat Ambuja Cement (41 per cent) and Glaxo (19 per cent),

The trend clearly indicated that infosys, select pharma, auto, cement, banks, petrochemicals sectors performed well during the year.

Commenting on the movement of indian stocks, Jignesh Shah, assistant vice-president (research), Triumph International Finance, a brokerage house, said that the Indian capital market will now wear a new look.

"If all goes as per schedule, by the end of this fiscal, we would see the advent of Internet-based trading on most stock exchanges, settlement taking place on rolling basis, badla (carry forward) trading taking place on a daily basis, introduction of badla trading at NSE, derivatives making a debut, most scrips trading in demat form, Indian mutual funds buying stocks in the GDR and ADR markets and more Indian companies' listing at the New York Stock Exchange and the Nasdaq," he said.

As part of market reforms and various investor-friendly decisions, the BSE created the 'Z' group for the companies that violate the listing norms.

The BSE has even filed winding up petitions against some of these companies for violation of various investor-friendly norms and SEBI and BSE regulations.

The Indian stock markets still depends much on foreign institutional investors. The major stock indices witnessed downward movement during the months when there was continous outflow by FIIs. The FIIs were net sellers during the months of March, June, July, August and September.

The net FII inflow during the year stood at Rs 4.04 billion against net outflow of Rs 5 billion in the previous calendar year.

Leading stock brokers said that government should look into this particular point of FIIs' market participation and take some initiatives which could reduce the dominance of FIIs in the Indian stock market.

UNI

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