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India shares seen pausing after surge

BOMBAY: Indian shares are expected to pause for breath and consolidate gains this week after their record-setting bursts last week, analysts said at the weekend.

The undertone continues to be bullish despite the market regulator's imposition on Friday of new margins aimed at curbing excessive volatility.

"An early correction will provide a good buying opportunity and shares will consolidate," said Sunil Seth, Research Director at brokerage Indosuez W.I.Carr Securities.

The benchmark Bombay Stock Exchange (BSE) 30-share index gained 11.66 percent last week to end Friday at a record closing high of 5,933.56, after having briefly pierced the 6,000-points mark to an intra-day high of 6,005.85.

So far this year the index moved up 18.53 percent, to place it among the best performers in Asia.

After a slow start in 2000, foreign funds have become aggressive buyers of technology and select cyclical stocks.

In February's eight trading sessions they have been net equity buyers of $174.1 million against $55.8 million worth of shares they bought in the whole of January.

"With so much money chasing so few stocks, the overall market can only go up," said Rajesh Jain, director at Pranav Securities.

The American Depositary Receipts (ADRs) of market leader Infosys Technologies Ltd sizzled on Friday amid a weaker Nasdaq, inspiring confidence for another week of gains for technology shares in the local market, analysts said.

The ADRs surged 26.79 percent close at 6701/401 on Friday. Infosys ADRs have jumped 76.3 percent in the past five trading sessions to lift local shares and the overall market.

There has been speculation that Infosys was close to announcing an acquisition but the firm said there were no new corporate developments and it was unaware of the reasons behind its stock surge.

The company's shares on the BSE soared 27 percent last week to an all-time high of 9,962.95 rupees.

On Friday, the Securities and Exchange Board of India (SEBI) announced steps to curb excessive volatility in the markets.

It imposed ad-hoc margins on brokers having substantial outstanding positions, special margins on volatile shares and directed the top 25 brokers in five leading exchanges to pay margins only in cash or as fixed deposit receipts.

Analysts said the steps would choke liquidity and force speculators to square their positions but some welcomed the safeguards.

"Investors will be more secure as the speculative heat diminishes," said W.I Carr's Seth._Reuters