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Solid Gains

The broad-based market rally in its fifth consecutive week has boosted the Sensex by almost 10% in November. Given the quick spurt in a short time, investors should avoid short-term view on the market.

Markets gain continued in the fifth consecutive week. The 87-points gain in the Sensex was on a broad-based rise in stocks, particularly a sharp spurt in tech stocks. The S&P CNX Nifty also registered similar gains - up 30 points (2.9 per cent).

Foreign institutional investors remained active buyers through the surge. In the past four weeks, the FIIs bought equities worth Rs 487 crore. However, domestic funds were net-sellers. There has also been a significant rise in trading volume. The average daily turnover at both stock exchanges crossed Rs 4,500 crore this fortnight, against a daily average of Rs 3,500 crore in the past eight months.

Large-cap stocks were key gainers this week. The public sector oil major, HPCL, was up 14 per cent. BPCL was also up 3.14 per cent. The upswing in Reliance Industries continued while it bagged 13 of the 23 oil exploration blocks awarded by the government. TISCO gained 4.7 per cent in anticipation of possible rise in the price of hot-rolled coils, expected to go up by Rs 500 per tonne. The FMCG counter also attracted buying interest. The BSE FMCG Index gained 3.5 per cent. While FMCG heavyweight HLL was up 5.42 per cent, Nestle was up 5.86 per cent.

With technology stocks clocking significant gains this month, the BSE IT Index was up 20 per cent. This week too the tech stocks – particularly small and mid-cap stocks -- were in the limelight. The BSE IT Index gained about 4 per cent. However, large-cap Infosys lost 1.33 per cent.

The enactment of the Securitisation Bill boosted banking stocks this week. The State Bank of India scrip registered a hefty gain of 5.9 per cent while ICICI Bank gained 3.8 per cent.

In an interesting move, the Securities Appellate Tribunal upheld the SEBI stay order for Grasim's open offer – which was scheduled for December 9 -- for a 20 per cent stake in L&T and an embargo on purchase by the former from the open market or a negotiated deal. Consequently, Grasim lost 5.27 per cent while L&T gained 1.3 per cent.

More Derivative Stocks on the Block This week, SEBI approved the Verma Committee Report on derivatives trading. This will allow stock exchanges to select from top 500 scrips (based on market cap) for derivatives trading. However, apart from market cap, liquidity of a particular stock should be considered to reduce speculation. The futures and options are currently allowed only in 29 scrips, of which, Satyam and Reliance are the most active contracts. The market regulator is also planning to reduce the derivative contract size from Rs 2 lakh to lower levels. This could well drive the volumes in derivatives.

Outlook Through November, the Sensex gained almost 10 per cent on a broad-based gain across sectors. The disinvestment initiative and relaxed derivative norms are positive triggers. However, given the quick spurt in a brief period, investors should avoid short-term view on the market.