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Market Turned Euphoric

Market regained its momentum after a three-week bearish rally. Aggressive buying on all counters and strong Nasdaq lifted the BSE Sensex up 6 per cent for the week. We could well witness a sustainable range bound rally, if not a bull-run.

The new year brought cheer to the equity market. Aggressive buying in technology and old economy stocks coupled with strong NASDAQ pulled both the BSE Sensex and NSE Nifty up by 6 per cent during the week – breaking the three-week downtrend. FIIs poured Rs 150 crore into the market. However, domestic funds remained skeptic and were net seller of worth Rs 130 crore. With rising stock prices, the combined average turnover at both the exchanges too surged by 32 per cent since last week.

The derivatives segment of NSE was more active with a17 per cent rise in stock future contracts over the week. Satyam Computers remained the most actively traded stock futures contract for the week.

The NASDAQ effect and expectation of strong Q3 results of frontline software stocks propelled the BSE IT Index up by whopping 13 per cent this week. Second rung stocks too gained ground – thanks to introduction of rolling settlement. Pentamedia Graphics up 53% was the major gainer. Shares of key auto and cement shares rallied on hopes of strong December sales. Speculative buying in pharma stocks lifted the BSE Healthcare index up 3 per cent during the week. Disinvestment hope raised IBP and VSNL share prices. Among side counters, Sierra Optima gained ground (24%) as the parent company approved a share-buyback plan.

SEBI has temporarily shifted some stocks to 'Z Group' with effect from December 31, 2001, as they failed to comply with the listing norms, redress of investors' grievances and make arrangement to demat their shares with both depositories (CDSL and NSDL). 'Z Group' has been created by BSE to warn investors that these firms have not complied with various norms. Trades executed in all Z Group scrips are settled on trade-to-trade basis. In trade-to-trade settlement, each transaction has to be settled by delivery of shares. No investor can square up its position.

In economic news, the latest government data showed sluggish tax revenues for the first eight months, amounting to just 40.8 percent of the full year target. India's fiscal deficit too is most likely to exceed its budgetary target of 4.7 per cent. As at the end of November '01 it has already touched 68 percent of the target. Last year, the government missed its fiscal deficit target of 5.1 percent of GDP, ending the year at 5.2 percent.

The tech heavy NASDAQ ended the week 3.6 per cent higher and the broader Dow Jones gained 1.2 per cent during the week.

Outlook
The market regained its momentum after three-weeks of downtrend with sharp turnaround in sentiments towards technology stocks. The outlook remains positive with eased border tension, the union budget, the quarterly results and FII inflows. All this could lead to a sustainable range bound rally, if not a bull-run.