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Broad Based Rally

All sectors contributed to propelling the Sensex above the 4000-point mark after a gap of more than two and a half years. Mid-caps, for once, took a back seat as large caps stole the show. Bank stocks were the biggest winners in a week marked by a revival in technology stocks.

After a gap of twenty-eight months the BSE Sensex crossed the 4000-point mark. By weekend the Sensex had reached 4125.12, registering a gain of 5.21 per cent. This is the highest weekly gain by the bellwether since January 2002. The Nifty too did not remain too far, gaining 5.08 per cent at 1311.15 points. The broader markets also kept pace with the S&P CNX 500 gaining 4.27 per cent. Mid-caps, however, could not match the scorching pace set by large caps and the CNX 200 Midcap Index closed the week up by 2.07 per cent.

Average trading volumes on both exchanges together crossed Rs 6000 crore a day to reach their highest level this year. The week, however, ended with declining shares outpacing advances by 2:1. FII inflows till Thursday remained healthy at Rs 564.6 crore.

All BSE sectoral indices closed the week on a positive note. Among these, the BSE Bankex was the biggest gainer clocking a return of 6.77 per cent over the week. This was closely followed by the BSE IT Index, which moved up a smart 6.69 per cent. Bank stocks largely remained range-bound in the first few trading sessions. It was only on Wednesday that bank stocks started looking up. Oriental Bank of Commerce, Punjab National Bank and Union Bank gained more than 5 per cent each. Then on Thursday ICICI Bank shot up by 13.49 per cent. Reports on the lifting of the 10 per cent cap on voting rights in private banks were said to have ignited the buying interest. Over the course of the week, the ICICI Bank stock climbed 15 per cent while all Bankex constituents closed the week in black. Some of the other significant winners were ING Vyasa and OBC, which were up 8.23 and 6.06 per cent respectively.

A similar situation prevailed in technology counters. On Wednesday, the BSE IT Index gained 4 per cent. While large cap names such as Infosys, Wipro and Satyam gained 5.3, 4.22 and 3.09 per cent respectively, smaller names such as Trigyn Technologies, Silverline and Pentasoft saw their share price move up by more than 10 per cent each. On the whole, though large caps gained between 4 and 6 per cent over the week it was the mid-caps and small names propelled the BSE IT index upwards. The upmove in Indian IT stocks coincided with the NASDAQ gaining 4.64 per cent to close the week at 1765.32.

Steel stocks witnessed heavy volatility. Steel Authority of India (SAIL) gained a phenomenal 30 per cent to close at Rs 51.45 on Monday. During the course of the day the stock touched its highest level since 1993. The very next day, however, it fell sharply losing more than 15 per cent. Thus in a span of two days the stock moved from the biggest gainer among index stocks to being the biggest loser. Steel stocks in general continued to be at the receiving end for the next few days. Essar Steel and Jindal Vijay Nagar thus lost 13 and 10 per cent respectively on Tuesday. SAIL continued to be hammered, falling by 11.9 per cent to Rs 38.50 on Wednesday and became the worst performing large cap stock for the second day in a row. It was only towards the end of the week that steel stocks managed to recover a bit.

Other PSU stocks such as HPCL and BHEL also gained heavily. The two PSUs were up 12.11 and 8.19 per cent respectively. These gains made the BSE PSU index the third best performing sectoral index over the course of the week with an upmove of 4.72 per cent. Healthcare and FMCG stocks also lent their might with most stocks moving up.

Though markets exceeded expectations in the past week, there was disappointment on the economic front. Growth in core sectors was down to 2.6 per cent in July as compared to 10.2 per cent in July 2002.

Stock markets have continued their northbound flight for the fifth successive week and the pace of the rally has surprised all. In view of this, the possibility of a sharp correction cannot be ruled out.