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Stocks Zoom on Growth Forecast

RBI estimate that the economy might grow at 7.5-8 per cent triggered a rally in the stock markets. The Sensex added nearly 350 points over the week to close at its all-time high

Stock markets ignored the rate hike and concentrated on positive growth forecast by the RBI to move further ahead in the week ended January 27, 2006. Firm Asian markets assisted the rally. Over the week, the BSE Sensex moved in the range of 9,433 to 9,884 levels before finally closing nearly 350 points or 3.67 per cent up at a historic 9,871 mark. The Nifty too displayed similar trend and closed up 2.82 per cent at 2,983 levels. Among the broader indices, the S&P CNX 500 closed 2.31 per cent up, while the CNX Midcap index gained 2.82 per cent.

Markets had a disappointing start to the week on Monday when the Sensex fell 56 points, following weak Asian markets. However, the fall was not as big as witnessed in some parts of the continent. The Nifty followed with a loss of 0.6 per cent.

Things changed from Tuesday onwards, both in the Asian as well as Indian markets. Though RBI raised short-term interest rates by a quarter percentage point, markets reacted positively to its growth forecast of 7.5-8.0 per cent from the earlier estimates of 7.0-7.5 per cent. The Sensex rose 85 points, while the Nifty followed with gains of 0.83 per cent.

The positive outlook and firm Asian markets fuelled yet another rally on Wednesday when the 30-stock BSE Sensex gained nearly 136 points to race to 9,686 levels. Another good news and yet another surge followed on Friday when markets opened after a day's break. Mittal Steel offered $22.3-billion to Arcelor, triggering hopes for more consolidation and better prices. This triggered huge buying interest in Indian steel-maker Tata Steel which rose nearly 9 per cent. Steel Authority of India Ltd (up 7 per cent) and Essar Steel (up 9 per cent) too attracted investors. Over the day, the Sensex added 185 points to close at an all-time high of 9,871 mark.

Among the 30 Sensex stocks, only two slipped over the week--Reliance Industries dropped 0.68 per cent, while Satyam Computers shed 0.46 per cent. L&T led the pack of gainers with a surge of 14.45 per cent.

Among the sectoral indices, BSE FMCG rose 5.16 per cent, followed by 5.10 per cent rise in the BSE Metal index. BSE Bankex rose 3.51 per cent. The combined daily average turnover on both exchanges dropped 4.11 per cent to Rs 11,815 crore in the week ended January 27, 2006. The FIIs invested nearly Rs 600 crore. Domestic mutual funds turned net sellers and pulled out Rs 340 crore over the week.