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Mild Rally at Dalal Street

BSE gained 30 points and Nifty was up 12 points. Buoyed by hectic buying in energy stocks, shares managed to close higher this week. With earnings season on, the coming weeks could see stock specific action.

Stocks snapped the three-week losing streak with a small 30-point rise at BSE and a 12-point climb at NSE. Active foreign fund buying in energy stocks following de-regulation of oil prices and selective interest in some key FMCG and pharma stocks overshadowed the extreme nervousness about IT earnings. FIIs signalled the new fiscal with net purchases to the tune of Rs 183 crore, but the domestic fund houses didn't take their cue. The domestic funds are still in bearish mode: they made net sales of Rs 166 crore. In terms of combined volumes, Tuesday witnessed the heaviest trading, when the Sensex gained a piffling 5 points. The gains were made on the back of record high volumes in ONGC and IOC.

Lately the oil stocks have been a prime pick for equity funds, as the markets are abuzz with the expected unlocking of value following their privatisation. The P/E multiple of BPCL and IPCL has risen from about 6 times in March 2001 to 15 times. On the other hand, it is evident that the freeing of oil prices is more about appearances than action. Despite a sharp spike in crude oil price of 6 dollar per barrel during March, the oil ministry has advised the oil-marketing firms not to pass on the price hike to consumers. The ministry has, in turn, offered to lower the excise duty. Unless the excise cut happens, the bottomlines of the oil companies are expected to be hit badly. However, barring BPCL, the developments did not spark off any sell-off in the oil stocks.

With the downward revision in the earnings and sales estimates for US tech majors ­ Microsoft and IBM -- Indian tech stocks had to face another lacklustre week. They still seem to be moving in tandem with the Nasdaq, which fell by 58 points in a single day. At home, the index heavyweight technology stocks also dropped on two trading sessions. Surprisingly there was a renewed interest in MNC Pharma stocks, which led to minor rally.

The week also saw buyback announcements from Sun Pharmaceuticals and Colgate Palmolive. The recent flurry of buyback proposals by MNCs operating through Indian subsidiaries has managed to attract the attention of the capital markets regulator. One can expect SEBI to introduce more stringent delisting and buyback norms to make sure that the Indian shareholders don't get a raw deal.

Outlook
In the absence of sustained fodder, the markets have been struggling hard to break the range bound trough. Indeed it closed high this week, guided primarily by PSU stocks. With the onset of earnings season, the coming weeks could see stock specific action, but overall the sentiment is likely to remain lacklustre.