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Oil Sell-off Sparks Market Fire

Boosted by the government's big-ticket reforms, BSE Sensex gained 160 points during the week. After an age, PSU stocks came alive. The positive mood could well be sustained awaiting the budget.

The government finally did. The pointers of big-ticket reforms triggered a sharp market rally. The BSE Sensex shot up by 160 points and the NSE Nifty gained 42 points. The rally was largely driven by the PSU stocks gained diversity with selective buying in technology and old economy heavy weights too by the weekend. FII's too got in act again, turning net buyers after a gap of one month. But domestic funds remained net sellers.

As compared to last week, the cash market displayed some vigour and registered a higher turnover. The derivatives segment of NSE too recorded its highest ever turnover of Rs 1494 crore on Thursday.

Government's few positive steps have provided direction to an otherwise rudderless market. The pace was set by the strategic sell-off of the government's stake in IBP and VSNL to IOC and Tata respectively. The added energizers were - new drug policy, amendments to Essential Commodities Act, decontrol of sugar and new compensation package for central government employees. PSU stocks emerged as the biggest gainers of the week. In an interesting finding, on an average, market capitalization of nine Group-A PSU stocks increased by about 25 per cent during the last one-month. It rose by 14 per cent, this week. However, Government measures are by no means sacrosanct, much remains to be accomplished on this front.

PSU stocks lead the rally through the week. But they faced profit booking on Friday. But overall, the market remained upbeat with a rally getting broad-based with select buying in old economy heavyweights - HLL, Reliance Petroleum and ITC.

The much-awaited new drug policy failed to pull the pharma sector. Insipid as ever, BSE Healthcare Index rose marginally by 1.5%.

The US tech-laden NASDAQ ended the week down 4.8 per cent while Dow Jones shed 1.7 per cent during the week.

Disinvestment – Much remains to be done. Of the 13 firms to be disinvested this fiscal, the government has so far sold its stakes in CMC, HTL, VSNL, IBP and few ITDC hotels as properties. The net realisation adds up to Rs 6000 crore (including 750% special dividend from VSNL) of the targeted Rs 12000 crore. The government has also planned to invite financial bids for Paradip Phosphate, Jessop & Co. and Hindustan Zinc in the coming months. HPCL and BPCL will be put at stake by mid-year. The government is unlikely to meet its budgeted realisation target from disinvestment. But pointers and the road-map look encouraging.

Market went ballistic and the mood remains positive. And could well sustain its enthusiasm awaiting the budget. But sustainability beyond that will heavily depend on macro guidance from budget and turnaround in market dynamics. The market buoyancy for a while can cause revival of individual interest in equities rather quickly, with enhanced relative attractiveness of stocks given the lowest ever yield on bonds.