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PSUs Skyrocket

It was a good week for equity markets with PSU stocks leading the charge. All disinvestment issues were oversubscribed and the biggest of them all, the ONGC, was oversubscribed in the first half-hour of opening. HLL was the big loser of the week.

Equity markets had a good run in the week gone by. The BSE Sensex gained 3.76 per cent (212.84 points) to close at 5,880.35. The NSE Nifty did equally well gaining 3.74 per cent (67.4 points) to end the week at 1,867.7 Mid-caps also participated in the rally with the CNX 200 MidCap Index gaining 2.39 per cent. All round gains were also reflected in the S&P CNX 500, which gained 4.43 per cent over the week.

FIIs were back with a bang making net purchases to the tune of Rs 1,211.9 crore. Daily average trading volumes at Rs 7,764.87 crore were 4.25 per cent less than that seen in the previous week. Except for Monday, declining issues lead advancing ones on all trading days. Till Thursday mutual funds were net buyers to the tune of Rs 58.5 crore.

The week started with a bang with the Sensex gaining 155.56 points on Monday. PSU stocks lead the charge with the BSE PSU index gaining 3.72 per cent. The over-subscription of IBP, CMC and IPCL further added to the "feel good factor". ONGC rose 5.9 per cent on hopes that the company's IPO would be priced aggressively. Among the other prominent gainers were Bharti Televentures, BPCL and VSNL, which gained 14.4 per cent, 6.8 per cent and 6.7 per cent, respectively.

After a holiday for Muharram markets opened on a weaker note. FMCG stocks were in the news following Proctor & Gamble announcement that it would make substantial cuts in detergent prices. Expectations are that HLL will follow suit and this will bring down margins. The stock fell 4.3 per cent and over two trading sessions lost close to 10 per cent.

Reports that steel makers would be cutting prices also affected sentiment. SAIL fell 2.8 per cent, while Tata Steel lost 2.6 per cent.

The ONGC issue opened on Friday and was fully subscribed within 11 minutes of opening. By the end of the day the issue was oversubscribed by two times. Other public issues also received a good response. Dredging Corporation was oversubscribed 18 times, while GAIL was oversubscribed 6-8 times. Power Trading Corporation, whose IPO is to close on Monday, was oversubscribed 5 times. The only laggard was LNG Petronet whose issue has not yet been fully subscribed.

With HLL taking a hit the BSE FMCG Index was the worst loser down 2.37 per cent. Healthcare stocks were also losers with the BSE healthcare index shedding 0.59 per cent. PSUs were on the winning side with the BSE PSU Index rising 7.43 per cent. Bank stocks also did well with the BSE Bankex rising 4.53 per cent.

The over-subscription of all PSU 'IPOs' has improved market sentiment. With ONGC issue already oversubscribed on the first day, fears of a fall in liquidity should prove to be unfounded. FII participation has also been strong and this should bode well for the markets.