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Technology Roars Again

Equities gained smartly with bulls scrambling for key technology stocks. Going by the momentum, things might get out of sync with fundamentals

It has been an euphoric week for Indian shares, which closed almost at its five-month peak high. The bull fervour with strong institutional interest in technology stocks sentimentally backed by the NASDAQ upswing pushed the BSE Sensex and the Nifty by as much as 4.5 per cent during the week. The domestic fund with their modest cash position active buyers again with Rs 20 crore worth of purchases almost after 2-weeks and the foreign institutional investors were aggressive buyers worth Rs. 398 crore during the week. The increased trading activity was reflected in the combined turnover at both the stock exchanges which averaged around Rs 4770 crore.

The week started on a dull note with a steady rise. The market was narrowly driven with foreign funds focussed on key tech issues -- Infosys, Wipro and Satyam. While the Infosys and Wipro gained momentum on the news of grabbing overseas projects, the possible sell-off of Satyam Infoway stake to a foreign media giant caught investors fancy. With Dhabol Power Company controversy getting messy, Indian lenders to the project -- ICICI and State Bank, faced sell-off tumbling by 5 per cent during the week.

Weakening Financials
Only four months are left for the government to meet its budget target. And the finance minister's optimistic statements to pump-up the economy with still higher borrowings and higher deficit could cause greater concern, as rising fiscal gap has been the key factor for sovereign downgrades by foreign rating agencies. The government borrowed Rs 6000 crore during the week at the lowest possible yields to complete its budgeted borrowing target of Rs 1.18 lakh crore for the fiscal.

The NASDAQ jumped 4.70 percent while the broader Dow Jones gained 2 percent during the week. However, the uninspiring unemployment figures at their six-year high dragged the market to close on an optimistic note.

Outlook
The dramatic 20 per cent rise in BSE IT Index reflects the revival of positive sentiments towards technology. But the rising market based on select sector and stock preferences with a fragile economic fundamental do not reflect solidity of the momentum.