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Markets on a High

The government finally gave the go-ahead to disinvestment, at least for now. The result: markets went ballistic, crossing the 3,000-mark after five months. The ball is in the divestment minister's court.

Following the past five weeks' trend, Indian stock markets continued their upward journey this week too. Although the market underwent correction mid-week, it had more than made up the loss by weekend after the government yet again gave the green signal to disinvestment. The BSE Sensex ended the week up 77.5 points largely led by PSU stocks and index heavyweights. The S&P CNX Nifty gained 19.7 points (1.9 per cent) over the week.

Interestingly, FIIs booked profits during the market rally. After remaining net-buyers for the past four weeks, they offloaded Rs 248.5 crore worth of equities. However, domestic mutual funds remained net seller for third consecutive week.

The disinvestment euphoria sent PSU stocks soaring. Oil major HPCL gained 25 per cent while BPCL ended the week up 13.2 per cent. Although there hasn't been any formal announcement, it is likely that HPCL will be disinvested through the strategic-sale route whereas BPCL would be privatised through the market route.

Apart from PSU stocks, index heavyweights also attracted buying interest. Reliance Industries gained 2.9 per cent following media reports that the company has emerged as a frontrunner to acquire South Korea's KP Chemicals. If successful, Reliance will become the world's largest producer of paraxylene. Another index heavyweight , Hindustan Lever gained 3.4 per cent. ITC gained 3.6 per cent. As a result, the BSE FMCG Index was up 2.6 per cent. The reasons aren't difficult to see. According to market research firm, AC Nielsen ORG-Marg, the sector showed positive growth in October, backed by an overall improvement across most product categories.

Technology stocks, however, succumbed to profit-booking. After a good run for four straight weeks, the BSE IT Index lost 1.4 per cent this week. While most mid- and small-caps ended the week in the black, large-caps like Wipro and Infosys came under selling pressure. A weak Nasdaq (down 3.8 per cent) also contributed to the IT index's fall. While IT stocks floundered, banking stocks continued to rise this week as well. SBI rose by 4.11 per cent and ICICI Bank was up 1.05 per cent.

November turned out to be a good month for cement and two-wheeler companies as they reported better sales. Gujarat Ambuja's sales grew by 24 per cent while L&T and Grasim registered a sales growth of 16 per cent and 11 per cent, respectively. However, profit booking led to a fall in the share prices of these companies. Among two-wheeler companies, Hero Honda maintained its market leadership despite posting low sales growth vis-à-vis Bajaj Auto and TVS Motors. However, except for TVS Motors, the share prices of the other two companies went southwards.

Outlook
After five months, the Sensex crossed the 3,300-level. After touching a low of 2,834 on October 18, the index was up 16.7 per cent. Till last week,s it was a broad-based rally, but this week markets were largely driven by PSU stocks. From here on, much will depend on the disinvestment policy to be announced in the coming week. Over to you, Mr Shourie.