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Stocks Make Merry

With the Sensex touching the 3500-mark almost after a year, it seems the bulls are finally taking charge. The arrival of the monsoons and heavy FII investments are the driving force behind this rally.

Foreign institutional investors (FIIs) were big buyers once again, buying equities worth Rs 867 crore. This flood of inflows propelled the Sensex and the Nifty up more than 4 per cent each. The Sensex closed the week at 3499 while the Nifty touched the 1100-mark. Mid-caps also continued to perform well as the S&P CNX Mid-Cap 200 clocked gains of 2.37 per cent. The positive sentiment was felt throughout the market and the broader indices like the S&P CNX 500 moved up by 3.89 per cent. So far in June, FIIs have pumped in Rs 1,849 crore into the equity markets. Mutual Funds, in comparison, sold equities worth Rs 122 crore

Incidentally, the week didn't start off on a bright note as profit-booking in index heavyweights like Hindustan Lever and Hero Honda pulled down the Sensex on Monday. The correction was across-the-board, except for the BSE Healthcare Index, which gained 1.57 per cent. The reason: the passage of a bill in the US that seeks to increase the number of drugs to be sold in generic form in the US market. The move is likely to benefit those Indian pharma companies where generic exports account for a huge share of total sales. Overall, the BSE Healthcare Index moved up by almost 3 per cent over the week.

Tuesday saw bulls return to the markets with a big bang, leading to the Sensex moving up by 95 points—the highest one-day gain in the past one year. While there was a lull on Wednesday, markets resumed their upward journey in the remaining trading sessions, albeit at a slower pace. Leading the sectoral rally was the BSE FMCG Index (up 4.59 per cent) followed by the BSE PSU Index, which gained 4.53 per cent. The latter gained due to the good response received by the Maruti IPO.

The BSE IT Index wasn't far behind, as it gained 4.25 per cent over the week, riding on the back of the Nasdaq's 2.46 per cent gain in the beginning. However, the Nasdaq's lacklustre movement in later sessions saw the index move up a mere 1.12 per cent over the week. The US markets on the whole were more subdued and the Dow Jones gained a mere 0.92 per cent.

Back home, cement stocks hogged the limelight with Larsen & Toubro finally agreeing to demerge its cement division in favour of Grasim Industries, making the latter the largest cement producer in the country. No wonder, Grasim gained the most over the week (up 16 per cent) vis-à-vis others like Gujarat Ambuja and ACC.

For 10 successive weeks, the S&P CNX Mid-cap Index had outperformed the Sensex. The Sensex, however, bounced back this month. Continued outperformance by large-caps will be determined by the intensity and pace of FII inflows.