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Looking Up Finally

Finally 3000! On the last trading day the market crosses the threshold. The credit for this goes to technology stocks and a handful of old economy stocks. It now remains to be seen whether this sustains.

You call it the Bill effect or whatever, the stock markets seemed to have raised toast a to the technology stalwart. Though the 2.60 per cent gain by the Sensex, wasn't exemplary, the fact was that it managed to climb above the 3000 mark was significant. On the other hand, the Wipro effect saw the Nifty outpace Sensex as it gained a strong 3.49 per cent. But the winner was the BSE IT Index, which soared by 9.078 per cent. This was the third highest weekly gain in the current calendar. Much of the participation came from the foreign institutional players (net purchases Rs 86 crore) while the domestic fund's investments moved at snail's pace.

However, it was a lethargic start to an exciting week. Absence of strong positive triggers from any sector and lack of buying from foreign funds' resulted in a tight rope walk for the BSE Sensex, for the first three trading sessions. Thanks to the BPO deals struck by few technology majors which coincided with surge in Nasdaq, market players hurried to lap up technology stocks. And the software billionaire's comments to pour in crores in India added to the excitement. However, the choice of the bulls was clearly restricted to the top-tier players—Infosys, Satyam and Wipro. The trio constitutes 90 per cent of the BSE IT Index and gained more than 8 per cent over the week. In contrast the second-tier stocks remained largely unmoved.

The beleaguered oil PSU stocks treaded with caution. A ray of hope that came from the news of the ministerial meet on privatization to be held on November 19, dimmed after the opposing ministers' raised their pitch. In all they ended the week on a flat note. Besides individual stock stories here and there, marginal improvement in India's weightage in the MSCI Asia Pacific Index also cheered the market towards the end.

Reform or Perish?
The impasse on economic reforms (read disinvestment) has already left the markets groping for direction. Perhaps now it's the turn of tax reforms to meet the same fate. The Kelkar report on tax reforms –which proposes to abolish section 88 rebates, bring down the deductions on home loans--has been met with skepticism. Its has been projected as being anti-common man. At the same time it proposes to hike the minimum tax slab for individual income and do away with the much touted dividend tax. This is likely to get a go-ahead, given that, the common man goes to elect his next government in 2004. The former part, howsoever good for economy is likely to fall on deaf ears.

Now that technology stocks have spearheaded the markets move to above 3000 levels, the question arises whether this will this be sustained or not. Much will depend on the fate of the disinvestment programme specifically in the context of the two oil companies. In the absence of any other development the market could remain range-bound.